The International Swaps
Derivatives Association said it will rule on whether credit-default swaps on Argentina have been triggered by a failure-to-pay credit event.
The decision would lead to payouts on all contracts,
according to ISDA’s rules. A total of 2,652 contracts insuring a
net $1 billion of Argentina’s debt were outstanding as of July
25, according to the Depository Trust Clearing Corp.
Swiss bank UBS AG asked for the ruling after the government
missed a deadline yesterday to pay $539 million in interest.
Argentina would be the first nation to trigger payouts on
default swaps since Greece restructured its debt in 2012.
“CDS are likely to be triggered,” Casey Reckman and
Daniel Chodos, analysts at Credit Suisse Group AG in New York,
wrote in a note to investors today.
Argentina’s 8.28 percent dollar bonds due December 2033
fell 7.09 cents to 88.5 cents on the dollar at 9:57 a.m. in New
York.
Argentina’s bonds are the world’s most expensive to insure,
according to data compiled by Bloomberg. It costs $4.2 million
in advance and $500,000 annually to insure $10 million of
Argentina’s debt for five years, according to data provider CMA.
That signals a 79 percent probability of default within that
time and compares with $3.1 million in advance yesterday.
The trades will be settled at auction if a credit event is
declared. ISDA’s determinations committee was formed in 2009 to
standardize the settlement process and makes binding decisions
for the market on whether contracts can be triggered.
The $1 billion of protection on Argentina’s debt compares
with about $3 billion for Greek bonds when they were triggered
in 2012 and $20 billion on Italy’s as of last week.
To contact the reporter on this story:
Abigail Moses in London at
amoses5@bloomberg.net
To contact the editors responsible for this story:
Shelley Smith at
ssmith118@bloomberg.net
Chapin Wright, Michael Shanahan