|People in Buenos Aires walk past a sign saying: 'Together we will fight against the loan shark vultures' [AP]|
Court-appointed mediator Daniel Pollack said the failure triggered an imminent default that, among other things, would hurt the Argentine economy as well as bondholders who were not part of the dispute.
"The full consequences of default are not predictable, but they are certainly not positive," Pollack said.
A US court ruling previously blocked Argentina from making $539m in interest payments, due by midnight on Wednesday, to the majority of bondholders until a deal with the hedge fund creditors was reached.
The hedge funds reject the restructuring accepted by 93 percent of bondholders and are demanding a full payout of $1.5bn on bonds they hold.
Cristina Fernandez, Argentina's president, had long refused to negotiate with the hedge funds, calling them "vultures" for picking on the carcass of the country's record $100bn default in 2001.
There was no immediate comment from the hedge funds.