The ratings agency Standard & Poor’s has found that Argentina has defaulted after it failed to make a $539 million interest payment due on its discount bonds.

The action came Wednesday afternoon as representatives for the country and New York hedge funds sought to reach a last-minute agreement on Argentina’s debt. Yet after more than five hours of mediated talks on Wednesday, neither side appeared closer to a deal.

Late Wednesday, the court-appointed mediator to the talks, Daniel A. Pollack, said, “Unfortunately, no agreement was reached and the Republic of Argentina will imminently be in default.”

Mr. Pollack added:

Default is not a mere “technical” condition, but rather a real and painful event that will hurt real people: these include all ordinary Argentine citizens, the exchange bondholders (who will not receive their interest ) and the holdouts ( who will not receive payment of the judgments they obtained in court). The full consequences of default are not predictable, but they certainly are not positive.

Earlier, Standard & Poor’s lowered its rating on the country’s debt to “selective default, ” noting that Argentina had a 30-day grace period following the June 30 scheduled interest payment date to make payment.

It is the latest development in a multiyear battle that stems from 2001, when Argentina defaulted on tens of billions of dollars of bonds. It later exchanged those bonds for discounted ones with most of its bondholders. But a small group of investors –including Paul Singer’s Elliott Management — refused to take the new bonds.

Those investors, led by NML Capital, an Elliott affiliate, sued the government, seeking full payment and interest.

The case wound its way through the United States courts until 2012, when a federal judge in Manhattan issued a ruling that said Argentina could not make payments to exchange bondholders without paying the holdouts.

Argentina appealed and took its case to the United States Supreme Court which rejected the appeal last month. Argentina had until the end of the day to pay the holdouts or risk defaulting for a second time in 13 years.

An NML spokesman said it was unfortunate that the talks did not lead to a resolution.

“During this process, the Special Master proposed numerous creative solutions, many of which were acceptable to us,” the firm said. “Argentina refused to seriously consider any of them, and instead chose to default.”

For much of the day on Wednesday a makeshift stage with eleven cameras was set up in front of the building where the talks were taking place in midtown Manhattan in anticipation of an announcement.

At one point in the afternoon, an older man named Francisco Sobrero from Argentina, showed up to protest against the hedge funds, which have been vilified as vultures by the government in Argentina, holding up two signs.

One read: “Vultures! Don’t take our pound of flesh.”