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ECONOMY | 09-05-2020 10:05

Debt deadline passes with no sign of deal, extension

Deadline for bondholders to accept a US$65-billion restructuring offer from government passed Friday afternoon with no signs of a deal, acceptance rate or an extension.

A deadline for bondholders to accept a US$65-billion restructuring offer from Argentina’s government passed Friday afternoon with no signs of a deal, acceptance rate or an extension.

Days before the deadline, the largest foreign bondholder creditor groups had already rejected the terms of the offer which imposes significant losses on interest and sets a three-year grace period before any payments are made.

Economy Minister Martín Guzmán, who said in an interview last week that the government is willing to discuss proposals from bondholders in order to reach an agreement, is expected to have breakfast Saturday with President Alberto Fernández and later make a public announcement on the restructuring process.

The more contentious deadline for Argentina is May 22 when about IS$500 million of delayed interest payments come due. Failure to reach an agreement or pay the cash by that date would result in a default. Argentina has won the backing of the International Monetary Fund and academics including Joseph Stiglitz and Jeffrey Sachs and insisted that even before the coronavirus pandemic wrecking its economy, it was unable to pay what is owed.

The South American country, which resolved its previous default just four years ago, failed to rebound under market-friendly former president Mauricio Macri who was voted out of office last year. The agriculture powerhouse is poised to contract for a third-consecutive year in 2020 and is battling with a widening gap between its official and unofficial exchange rates due to capital controls and annual inflation still holding above 48 percent.

Argentina’s dollar bonds trade between 25 and 30 cents on the dollar and have lost nearly 40 percent this year, about four times more than the average in emerging markets, according to JPMorgan Chase & Co.’s EMBIG Diversified index.

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by Scott Squires, Bloomberg

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