A $135 Million Bond Payment Is Late and Stuck in Argentina
- IRSA has deposited the money, but can’t get cash to creditors
- It’s likely an unintended consequence of new capital controls
It was the kind of transaction that would have been mundane just a few weeks ago in Argentina: a company owed a bond payment to foreign and local creditors. It was a large payment, over $130 million in principal alone, but the company, a real-estate firm called IRSA, had plenty of cash to cover it.
When it turned over the money to the firm processing the payment, though, things got complicated. Under the new currency rules imposed by the government to try to staunch dollar outflows and stabilize the peso, the cash couldn’t be sent to creditors’ overseas accounts. As the payment was coming due Sept. 9, the firm, Clearstream, began releasing a series of statements confirming the money was, at least temporarily, frozen.
All of which has added another layer of confusion and worry to markets in a country already paralyzed by a financial crisis that has the government on the cusp of default for the third time in the past 20 years. Among the most pressing questions traders and investors were grappling with Friday was whether this blocked payment was a technical glitch that the government would resolve soon or a more permanent feature of the controls that would imperil payments by other companies and the government itself in coming weeks.
For the time being, most observers seemed willing to wait the situation out, expecting that Argentine officials will quickly tweak the rules so as to avoid corporate bond defaults.