Credit ratings agency Standard & Poor’s cut the country’s already-gloomy CCC minus credit rating to “selective default”, meaning that the country is honouring some of its financial obligations and not others.
The country has run into a deadline for a bond payment – but a US legal decision means that it must first pay two hold-out funds which have not accepted Argentina’s attempts to restructure its debt.
The talks yesterday were the first face-to-face negotiations with NML Capital and Aurelius Capital, the hold-out funds.
Argentina’s economy minister, Axel Kicillof, met with representatives in New York, but signalled no progress in a press conference afterwards. Before this week, the government has refused to meet with the groups, which they term “vulture funds”.
Kicillof insisted that only the funds could ask for a delay in the payments to allow further discussions, but indicated little to no room for negotiation on the government’s part.
Argentina’s long legal battle with the hold-outs is part of its chequered fiscal history – the funds refused to participate in debt restructuring in 2005 and 2010, which followed a default at the beginning of 2001.
The court decision in June meant that the country could not appeal against its creditors, leaving the already-embattled government with a $1.33bn (£786m) bill. The legal decisions also meant that the hold-outs had to be paid first, ahead of other bondholders.
“The foreign currency sovereign credit ratings will remain at selective default until Argentina cures its payment default on the discount bonds. If and when Argentina cures the payment default on the discount bonds, we will reassess the sovereign's general credit standing,” said a Standard & Poor’s statement.