Wednesday, February 21, 2024

ECONOMY | 07-07-2020 14:04

Government files new debt restructuring offer with SEC

Argentina formally presents its new proposal to the US Securities and Exchange Commission, extending deadline for acceptance to August 4.

Argentina on Tuesday formalised its new offer to creditors by presenting its proposal to the US Securities and Exchange Commission as President Alberto Fernández's government tries again to restructure USS$66 billion in foreign debt.

Talks between the government and private creditors have stalled in recent weeks. Major creditor groups have yet to formally comment on the new proposal, but the offer has already received significant public support.

Creditors have until an August 4 deadline (5pm New York time) set by the government to agree to the restructure plan – an exchange offer to bondholders under foreign law. The new offer is worth 53.5 cents on the dollar, a significant improvement on Argentina's original starting position of 39 cents, which was rejected. It also reduces the grace period from three years to one year, with payments beginning in September 2021.

Fernández said that Argentina "has maintained a position open to dialogue and considering various proposals" put forward by creditors.

The Peronist leader stressed that his country had "evaluated and considered" creditors' points of view and "deeply analyzed their suggestions, within the confines of restoring debt sustainability."

Crisis-wracked Argentina – one of the world leaders in food exports – has been in recession since 2018 and two months ago defaulted for the ninth time after failing to pay US$500 million of interest on its bond debt. It has been further rocked by the coronavirus pandemic and the International Monetary Fund predicts its economy will shrink by almost 10 percent this year. According to the Central Bank's survey of economists, GDP will slump by 12 percent this year.

Latin America's third largest economy actually owes US$324 billion in total, a sum that represents around 90 percent of its GDP.

On Tuesday, the International Monetary Fund hailed the new offer as "an important step." Argentina owes the Fund around US$44 billion of a US$57-billion credit line approved under the Mauricio Macri adminstration.

"The revised offer by the Argentine authorities is an important step in the debt restructuring process with its private creditors," IMF spokesperson Gerry Rice said in a statement. 

The IMF affirmed that it hopes that "all the parties involved will continue to work constructively and in a timely manner with the aim of reaching an agreement that places [Argentine] public debt on a sustainable path." 



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