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Argentina faces a Wednesday deadline for more than $500 million in debt payments. It appears unlikely that bondholders will receive their money, bringing to a head a standoff with a separate group of creditors, the so-called “holdout” hedge funds that have refused the country’s two debt-restructuring offers over the past decade.

At the center of the case is a 2012 U.S. District Court ruling that Argentina cannot pay bondholders who accepted the restructuring agreements until it pays the holdouts — a decision that the government contends puts it in a costly legal bind.

Here’s a primer on what might happen should Argentina...

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