Government hails ‘success’ of 4.34-trillion local debt swap

President Alberto Fernández’s government hailed the “success” of its local debt swap offer on Thursday after revealing that Argentina had exchanged 4.34 trillion pesos (US$21.66 billion at the official exchange rate) of maturing notes for new ones due in 2024 and 2025.

"We cleared maturities of more than 4.3 trillion pesos, extending the curve to the years 2024 and 2025, with an overall adhesion rate of 64 percent of eligible securities," said an Economy Ministry source late on Thursday, who requested anonymity.

The government’s operation intends to alleviate coming burdens and remove fears of a local debt default, pushing back maturities for later dates. Argentina’s leading opposition parties has criticised the move, which comes in an election year, and has accused the ruling coalition of stockpiling problems for the next administration. 

The agreement to carry out the swap was sealed three days ago by Economy Minister Sergio Massa after meetings with representatives from banks and investment funds.

"With this process of rearrangement and the extending of the sovereign [debt] curve in pesos, we will manage to preserve the sustainability of [Argentina’s] debt," Finance Secretary Eduardo Setti said in a post on social media, reacting to the news.

In exchange for peso-denominated bonds, the government offered a basket of two types of assets, some of which are adjusted only for inflation and others that adjust via a combination of inflation and the evolution of the official exchange rate.

Some 44 percent of peso-denominated debt is held by private banks and funds, while the rest is distributed among state enterprises, government agencies and individual bondholders.

The government previously carried out a three-trillion-peso debt swap in January.

As a result of this latest debt swap, global rating agency Standard & Poor’s on Thursday cut Argentina's peso debt rating from CCC- to SD (“Selective Default”), noting "macroeconomic vulnerabilities," according to a statement in New York.

Argentina’s economy grew by 5.2 percent in 2022, but inflation is rampant, reaching 95.8 percent last calendar year.

– TIMES/AFP