The government announced at dawn Tuesday it had finally reached agreement with three major creditors to restructure more than US$65 billion in foreign debt.
The deal arrived just hours before the August 4 deadline was due to expire. 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.
Argentina has been in default – for the ninth time in its history – since May 22 when the country missed a deadline to pay US$500 million in interest on the debt that is subject to the current negotiation.
According to reports, the government has agreed to move up payment dates for new bonds. Th offer includes bonds from 2005 and 2010, issued as a result of previous debt restructurings, and also others issued from 2016.
‘Significant debt relief’
The deal involves the Ad Hoc, Argentina Creditor Committee and Exchange Bondholder groups, as well as "certain other significant holders," the Economy Ministry said in a statement.
“The Republic of Argentina and representatives of the Ad Hoc Group of Argentine Bondholders, the Argentina Creditor Committee and the Exchange Bondholder Group and certain other significant holders (collectively, the “Supporting Creditors”) today have reached an agreement that will allow members of the creditor groups and such other holders to support Argentina’s debt restructuring proposal and grant Argentina significant debt relief,” it read.
“Pursuant to the agreement, Argentina will adjust certain of the payment dates contemplated for the New Bonds set forth in its July 6, 2020 invitation (the “Invitation”), without increasing the aggregate amount of principal payments or interest payments that Argentina commits to make while enhancing the value of the proposal for the creditor community,” it continued.
Last month the three major groups, claiming 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.
Argentina had offered a deal that represented 53.5 cents on the dollar -- a significant improvement on its original starting position of 39 cents – but the creditor groups were holding out for no less than 56.5 cents on the dollar.
The new deal reached by both parties will allow bondholders to recover more than 54 cents on the dollar, while improving payment terms, government sources confirmed to the AFP news agency. A deal has been reached "by advancing payments and without giving up the economic benefit," analyst Sebastián Maril told AFP on Tuesday. "The economic issue is solved, [but] it is necessary to see the detail of the legal terms."
Below, the full statement:
According to a report from Noticias on Monday evening, the main group of investment funds are drawing up a statement to confirm that they have reached an agreement in principle with the government.
The creditors, which includes the world's largest fund BlackRock, will clarify in it that talks are still ongoing regarding legal terms, with creditors seeking guarantees and clauses regarding the possibility of Argentina falling into default for a tenth time in its history.
Quoting unnamed sources identified only as from "one of the funds," the magazine said that creditors were happy "the government loosened and finally understood."
According to reports in the local press, Guzmán met on Monday via videoconference with a number of officials, including Lower House Speaker Sergio Massa and Buenos Aires Province Governor Axel Kicillof to explain details of the accord. He also met with Vice-President Cristina Fernández de Kirchner, who is said to have been closely following the talks, at her home.
The deal comes in the wake of earlier reports that the two sides had made progress toward a deal over the weekend, driving the nation’s bonds to the highest level in more than five months Monday.
The breakthrough came during a call on Sunday between Guzmán and BlackRock Inc managing director Jennifer O’Neil, according to a report from Bloomberg, with participation of Bank of America Corp, which is advising the government.
Next up for Argentina will be talks over a new programme with the International Monetary Fund over its US$44-billion credit-line, granted in 2018 to the government of former president Mauricio Macri amid a currency crisis.