Argentina secures backing from creditors for debt restructuring
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Buenos Aires — Argentina has defused fears of a messy default after it gained backing from creditors, allowing it to exchange 99% of the bonds involved in a $65bn restructuring, a deal that could set a precedent for future sovereign crises.
After months of winding and tense negotiations, framed by the coronavirus pandemic, bondholders tendered 93.55% of the eligible bonds in the exchange, which with collective action clauses (CACs) allowed a near-full deal to go ahead.
“In recent days we have worked on the conditions of an offer that gained huge acceptance by our creditors as a result of the dialogue process in past months,” economy minister Martin Guzman told a news conference.
A deal is a major win for Argentina, Latin America's third-largest economy, as it looks to escape from its ninth sovereign default and revive an economy in its third year of recession and expected to contract about 12.5% in 2020.
Centre-left President Alberto Fernandez, who took power in December, said Argentina had been in a “labyrinth” of debt that had now been solved. He thanked allies, including Pope Francis, an Argentinian, and Mexican President Andres Manuel Lopez Obrador.
The government said the deal and a separate restructuring of local law dollar debt would together bring financial relief of $37.7bn over the 2020/2030 period, and help cut average interest payments on foreign law bonds to 3% from 7%.
“Now there are other challenges, the first of which is to reactivate the domestic market,” Fernandez said at the Casa Rosada presidential palace.
What next?
Guzman said Argentina now needed to turn its attention to sealing a new programme with the International Monetary Fund to replace a $57bn facility agreed to in 2018, as well as tackling provincial debt amid various smaller regional restructurings.
He said the government planned to send a 2021 budget bill to Congress in mid-September, which would include a forecast for a primary fiscal deficit next year of about 4.5%. A new deal with the IMF is unlikely before March next year, said Guzman.
The 1% of bonds that did not meet collective action clause (CAC) thresholds of support for a restructuring highlighted pockets of holdouts on individual bonds, though Guzman told reporters it was not a major issue and would be resolved.
In a statement, the government said it had excluded certain bond series including the USD par 2038 bonds II and III and Euro ...
After months of winding and tense negotiations, framed by the coronavirus pandemic, bondholders tendered 93.55% of the eligible bonds in the exchange, which with collective action clauses (CACs) allowed a near-full deal to go ahead.
“In recent days we have worked on the conditions of an offer that gained huge acceptance by our creditors as a result of the dialogue process in past months,” economy minister Martin Guzman told a news conference.
A deal is a major win for Argentina, Latin America's third-largest economy, as it looks to escape from its ninth sovereign default and revive an economy in its third year of recession and expected to contract about 12.5% in 2020.
Centre-left President Alberto Fernandez, who took power in December, said Argentina had been in a “labyrinth” of debt that had now been solved. He thanked allies, including Pope Francis, an Argentinian, and Mexican President Andres Manuel Lopez Obrador.
The government said the deal and a separate restructuring of local law dollar debt would together bring financial relief of $37.7bn over the 2020/2030 period, and help cut average interest payments on foreign law bonds to 3% from 7%.
“Now there are other challenges, the first of which is to reactivate the domestic market,” Fernandez said at the Casa Rosada presidential palace.
What next?
Guzman said Argentina now needed to turn its attention to sealing a new programme with the International Monetary Fund to replace a $57bn facility agreed to in 2018, as well as tackling provincial debt amid various smaller regional restructurings.
He said the government planned to send a 2021 budget bill to Congress in mid-September, which would include a forecast for a primary fiscal deficit next year of about 4.5%. A new deal with the IMF is unlikely before March next year, said Guzman.
The 1% of bonds that did not meet collective action clause (CAC) thresholds of support for a restructuring highlighted pockets of holdouts on individual bonds, though Guzman told reporters it was not a major issue and would be resolved.
In a statement, the government said it had excluded certain bond series including the USD par 2038 bonds II and III and Euro ...