Log in
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 

MarketScreener Homepage  >  News  >  Economy & Forex

News : Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Argentina defuses default crisis with 'massive' debt deal

09/01/2020 | 05:23am EST
Argentina's Economy Minister Martin Guzman waves before attending a news conference to give details about the agreement to restructure Argentina's debt, at the Casa Rosada Presidential Palace, in 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 $65 billion 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 massive acceptance by our creditors as a result of the dialogue process in past months," Economy Minister Martin Guzman told a news conference on Monday.

A strong deal is a major win for Argentina, Latin America's No. 3 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 around 12.5% this year.

Reuters reported on Friday, when the deal deadline closed, that the government was confident of high creditor support after winning over its main three creditor groups to a deal in principle earlier in August.

Center-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 Argentine, 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 $37.7 billion 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.


Guzman said Argentina now needed to turn attention to sealing a new program with the International Monetary Fund to replace a defunct $57 billion facility agreed 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 around 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 Par 2038 Bonds II and III following the invitation results.

The bonds being restructured have CACs that mean the government needs a certain level of support to restructure them. Older 2005 indenture bonds require a combined 85% of creditor support, with two-thirds of support needed on each individual series.

The strong support and few holdouts stands in contrast to Argentina's 2005 debt restructuring, which saw creditors holding around a quarter of bonds reject a deal, leading to over a decade of legal battles.

"I was expecting them to easily clear the CAC threshold on most of the bonds, but this result was on the high side of my expectations," said Ajata Mediratta, president of Greylock Capital Management in New York, which was involved in the talks.

Eduardo Levy Yeyati, an economist at Torcuato Di Tella University, said the good result underscored the important role of CACs, similar to what had happened with a recent successful restructuring in Ecuador.

"Once the government made a realistic offer acceptable to creditors, the CACs induced the rest to get on board, dissuading holdouts and avoiding costly litigation," he said. We now have four years ahead of us to implement the policies that make this swap a sustainable solution."

(Reporting by Adam Jourdan, Hugh Bronstein and Walter Bianchi; Additional reporting by Eliana Raszewski and Rodrigo Campos in New York; Editing by Rosalba O'Brien, Leslie Adler and Catherine Evans)

By Hugh Bronstein, Walter Bianchi and Adam Jourdan

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
EURO / ARGENTINE PESO (EUR/ARS) 0.00% 96.3341 Delayed Quote.43.01%
TELLA, INC. -3.94% 707 End-of-day quote.306.32%
US DOLLAR / ARGENTINE PESO (USD/ARS) 0.00% 80.87 Delayed Quote.34.78%
Latest news "Economy & Forex"
05:25pROYAL AUSTRALIAN NAVY : Arunta returns home after more than 160 days at sea
05:16pChile's Senate greenlights second pension withdrawal bill
05:16pNEWS HIGHLIGHTS : Top Global Markets News of the Day
05:16pNEWS HIGHLIGHTS : Top Company News of the Day
05:15pCENTRAL BANK OF BELIZE : Scotiabank (Belize) Ltd. Sale of Shares
05:09pPassengers and freight transportation in the Republic of Moldova in January-September 2020
05:09pExternal trade activity of the Republic of Moldova in January-September 2020
05:05pST BARBARA : Appendix 3G
04:50pEU warns decision on UK financial services won't come before January 1
04:43pROXGOLD : Utilizes Pre-emptive Rights to Buy Back 0.3% NSR on the Séguéla Gold Project
Latest news "Economy & Forex"