Argentina reached an agreement with bondholders for the restructuring of its debt
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2020-08-05
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The Argentine government announced Tuesday (August 4), they finally reached an agreement with three major creditors to restructure more than $65 billion in foreign debt.
The deal arrived just hours before the deadline on Tuesday. The government has now pushed the date to August 24, "to give effect to the agreement," which came after months of wrangling and deadline extensions.
In a statement issued by the Economy Ministry, the government said the deal "will allow members of the creditor groups and such other [bond] holders to support Argentina's debt restructuring proposal and grant Argentina significant debt relief." The improvement in the offer also includes some changes to legal terms.
The bonds represent roughly a fifth of the country's overall US$324 billion debt burden, which amounts to around 90 percent of its GDP.
The three main groups of creditors announced Tuesday that they were "pleased" with the "preliminary agreement" sealed with the government to restructure some US$66 billion in bonds issued under foreign legislation.
A joint statement, issued by the Ad Hoc Argentine Bondholder Group, the Exchange Bondholder Group, and the Argentina Creditor Committee, called on "all creditors" to support the deal, though the use of the word "preliminary" was pointed, given the government did not use that word.
"We are pleased to have reached an agreement in principle with Argentina for a proposal that will provide the country with the necessary economic relief and the sustainable path it needs in the wake of COVID-19, as well as renewed access to the international capital markets for Argentine issuers to help encourage future, long-term investment in the country," the groups said.
"The agreement is a good outcome for all participants and delivers an offer that all creditors should support," they added.
Last month the three major groups, who claim to represent "60 percent of the exchange bonds and 51 percent of the global bonds in circulation" – giving them veto power over any deal – said they had rejected Argentina's latest proposal.
"We resolved an impossible debt in the biggest economic crisis in memory and the midst of the pandemic," said Argentine President Alberto Fernández on Tuesday. "Now the horizon is clear for where we want to go to."
IMF chairwoman Kristalina Georgieva congratulated the government on Twitter, adding: "Look forward to a successful conclusion in the interest of all."
The Economy Ministry said in a statement that the deal "will allow members of the creditor groups and such other [bond] holders to support Argentina's debt restructuring proposal and grant Argentina significant debt relief."
Argentina's formal offer filed with the United States Securities Commission (SEC) had contemplated payment of around 53.5 cents on the dollar, while creditors were said to have been demanding close to 56.5 cents per greenback. According to reports, the new deal is over 54 cents on the dollar.
SOUNDBITE: MARTÍN GUZMÁN, Ministry of Economy of Argentina
"How does this help? Because the relief that this provides will create conditions of sanitation for public finances, of certainty for the private sector, and will give Argentina another platform to take off, when the pandemic gives us a truce, the relief is basically that before every 100 dollars of debt Argentina paid 7 dollars of interest, now it will pay 3 dollars of interest, which is a combination of reducing the average interest rate from approximately 7% to 3.07% and add to this a reduction in capital owed of 1.9%. This is equivalent to the fact that in the first 5 years the State will face a lower debt burden of 42,500 million dollars, it is the number of payments in which it is reduced the burden for the State, and in the period 2020-2030 the relief will be 37.7 billion dollars".
The deal arrived just hours before the deadline on Tuesday. The government has now pushed the date to August 24, "to give effect to the agreement," which came after months of wrangling and deadline extensions.
In a statement issued by the Economy Ministry, the government said the deal "will allow members of the creditor groups and such other [bond] holders to support Argentina's debt restructuring proposal and grant Argentina significant debt relief." The improvement in the offer also includes some changes to legal terms.
The bonds represent roughly a fifth of the country's overall US$324 billion debt burden, which amounts to around 90 percent of its GDP.
The three main groups of creditors announced Tuesday that they were "pleased" with the "preliminary agreement" sealed with the government to restructure some US$66 billion in bonds issued under foreign legislation.
A joint statement, issued by the Ad Hoc Argentine Bondholder Group, the Exchange Bondholder Group, and the Argentina Creditor Committee, called on "all creditors" to support the deal, though the use of the word "preliminary" was pointed, given the government did not use that word.
"We are pleased to have reached an agreement in principle with Argentina for a proposal that will provide the country with the necessary economic relief and the sustainable path it needs in the wake of COVID-19, as well as renewed access to the international capital markets for Argentine issuers to help encourage future, long-term investment in the country," the groups said.
"The agreement is a good outcome for all participants and delivers an offer that all creditors should support," they added.
Last month the three major groups, who claim to represent "60 percent of the exchange bonds and 51 percent of the global bonds in circulation" – giving them veto power over any deal – said they had rejected Argentina's latest proposal.
"We resolved an impossible debt in the biggest economic crisis in memory and the midst of the pandemic," said Argentine President Alberto Fernández on Tuesday. "Now the horizon is clear for where we want to go to."
IMF chairwoman Kristalina Georgieva congratulated the government on Twitter, adding: "Look forward to a successful conclusion in the interest of all."
The Economy Ministry said in a statement that the deal "will allow members of the creditor groups and such other [bond] holders to support Argentina's debt restructuring proposal and grant Argentina significant debt relief."
Argentina's formal offer filed with the United States Securities Commission (SEC) had contemplated payment of around 53.5 cents on the dollar, while creditors were said to have been demanding close to 56.5 cents per greenback. According to reports, the new deal is over 54 cents on the dollar.
SOUNDBITE: MARTÍN GUZMÁN, Ministry of Economy of Argentina
"How does this help? Because the relief that this provides will create conditions of sanitation for public finances, of certainty for the private sector, and will give Argentina another platform to take off, when the pandemic gives us a truce, the relief is basically that before every 100 dollars of debt Argentina paid 7 dollars of interest, now it will pay 3 dollars of interest, which is a combination of reducing the average interest rate from approximately 7% to 3.07% and add to this a reduction in capital owed of 1.9%. This is equivalent to the fact that in the first 5 years the State will face a lower debt burden of 42,500 million dollars, it is the number of payments in which it is reduced the burden for the State, and in the period 2020-2030 the relief will be 37.7 billion dollars".
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