(Updated at 5:10 pm ET)
The Supreme Court said today it would not hear Argentina’s case against hedge fund creditors, and Argentina’s stock market got killed on the news.
Argentina’s Merval Index, a price-weighted index designed to reflect the performance of Argentine listed companies, fell 12%.
The Supreme Court’s decision is a major blow to Argentina, as it will now be forced to default on its debts or negotiate with creditors, which include Paul Singer’s Elliott Management.
It all stems from the country’s default early last decade. Argentina restructured its debt, but some hedge funds like Elliott Management refused to take part in the restructuring and demanded full payment. The two sides have been battling in court for years about whether Argentina has to pay the holdout hedge funds the full amount. A lower court had ruled that Argentina is on the hook, and the Supreme Court declined to hear the case (and therefore can’t reverse it).
Argentina’s government had previously called the creditors “vultures.”
BI’s Linette Lopez notes that this ruling was unexpected.
BNP Paribas said: “This is the most negative scenario.”
All in all, not a good day for Argentina, who will now be forced to win back the confidence of investors and now risks defaulting.
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