Argentina: Last-minute $ 66 billion restructuring

After more than three months of tough negotiations, the Argentine government announced Tuesday that it had reached an agreement with its creditors to restructure $ 66 billion in debt.

The Economy Ministry said in a statement that Argentina had reached an agreement with the three creditors’ groups that had been rejecting their offer, speaking of “great satisfaction” for the country, while the negotiation deadline expired Tuesday at 21:00 GMT.

“Argentina will adjust certain payment dates” compared to the government’s original offer, the statement said. This includes payments in January and not in March of each year as originally planned.

At the end of July the three creditors’ groups – the Exchange Bondholders, Ed Hook and the Argentine Creditors Committee – rejected the recent proposal by the government of President Alberto Fernandez for restructuring.

Discussions going on since April 20 include bonds dating back to 2005 and 2010 that resulted from previous restructuring as well as new bonds issued in 2016.

In particular, Buenos Aires has proposed paying $ 53.5 for every $ 100 of face value for the bonds. But the creditors asked for $ 56.5.

An official source told France Press that the new agreement provides for creditors to collect more than $ 54 for every $ 100 and improves payment deadlines.

Analyst Sebastian Mariel told AFP that this improvement makes it possible to “advance the payment date without affecting the economic benefits” for Argentina.

He added, “The economic issue has been resolved. It remains to be seen the details of the legal aspects.”

Bad position

This agreement is the result of three months of particularly tense negotiations, after the three creditors’ groups announced last week their rejection of Argentina’s offer and threatened to exercise the right of veto on the grounds that they represent more than half of the holders of bonds issued under foreign law.

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Despite the differences, the government and creditors have made clear that they want to avoid the consequences of a prolonged default.

Argentina has in fact been in default since May 22, when it had to pay interest of $ 500 million owed on three of the bonds under discussion. Despite the lack of payment, negotiations continued.

Last week, the South American nation defaulted on an additional $ 600 million in interest on other bonds undergoing restructuring.

Argentina has recorded inflation of more than 50% year-on-year and suffers from a record poverty rate.

Argentina has a total debt of $ 324 billion, equivalent to 90% of its GDP.

The Argentine economy has been in recession since 2018 and will suffer more this year due to the Covid-19 epidemic, with GDP shrinking by 9.9% according to the latest IMF projections.

The country must also negotiate a new program with the International Monetary Fund, which requested a $ 57 billion loan, of which 44 million have been disbursed.

It has another thorny issue is the $ 41.7 billion debt issued under national legislation, whose payments have been postponed until December 31, 2021.


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