NEWS BONDS: Defaults, revisited

Jul 1, 2014

A market return by Ecuador and a series of maneuvers by Argentina dominated debt markets in the second quarter. By Eduardo García

Sovereign defaulters Ecuador and Argentina marked the May-June period in the bond market: Ecuador with a $2 billion issue that surprised bankers and investors alike, and Argentina with a series of moves to avoid default after a US court ruling that took markets by surprise.

While the two sovereigns dominated the headlines, a barrage of other Latin American issuers continued making the best of strong liquidity and appetite for high-yielding assets to squeeze in prices.

In mid-June, the US Supreme Court upheld a ruling by a lower court calling for Argentina to pay some $1.3 billion to holdout creditors before servicing restructured bonds. The ruling came shortly before a $900 million payment to restructured bondholders came due on June 30.

Paying holdout creditors in full would trigger a clause agreed...

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