Argentina reaches agreement with its creditors for debt swap

The Ministry of Economy of the Latin American nation has indicated that this agreement "will grant the country significant debt relief"
Hit by decades of inflation, recessions and cyclical devaluations, in 2020 many Argentines prefer to take refuge in the dollar as a form of saving

AFP/JUAN MABROMATA  -   Hit by decades of inflation, recessions and cyclical devaluations, in 2020 many Argentines prefer to take refuge in the dollar as a form of saving

Argentina and its three main groups of private creditors reached an agreement for the restructuring of bonds under foreign legislation that will grant the country "significant debt relief," the Economy Ministry said in a statement early Tuesday morning.

According to this agreement, which is between Argentina and representatives of the Ad Hoc Group of Argentine Bondholders, the Argentine Creditors Committee and the Exchangeable Bondholders Group and other holders, the country "will adjust some of the payment dates contemplated for the new bonds" established in its exchange proposal presented last July 6.

"Without increasing the total amount of capital payments or interest payments that Argentina undertakes to make and at the same time improving the value of the proposal for the creditor community," the document released by the department states.

A new term to formalize

In order for the agreement to be effective and for the bondholders to formalize their adhesion, Argentina, which has been in recession since 2018, has again extended the term of its offer, which seeks to exchange foreign-law bonds for US$66.238 billion, from today until August 24.

Specifically, the statement specifies that the debt bonds to be restructured, issued in 2005 and 2010 and from 2016, will be exchanged for new securities in dollars and euros with maturities in 2029, 2030 and 2038.

"Argentina, subject to the opportunity to show its support from the international community in a general sense, will adjust certain aspects of the collective action clauses in the documents of the new bonds to address the proposals presented by the members of the creditor community," the ministerial portfolio points out.

The first offer was launched in April

The government of Peronist Alberto Fernández and the holders of bonds under foreign law have been in intense negotiations since the country launched its first swap offer last April, which did not receive the necessary minimum support.

Since that time, while Argentina has extended several times the deadlines to reach an agreement, both parties have been exchanging several restructuring alternatives.​​​​​​​

It was on 6 July last that the Fernández government formalised what it insisted was its final and definitive offer, with improvements on the first, but which was rejected by the three largest groups of private creditors, who responded with a joint counter-offer.

It was estimated that the difference between the two proposals, from the government and the creditors, was only about three dollars, since while Argentina's offer was valued at about 53 dollars, the creditors' offer was valued at about 56 dollars.

At the same time as the talks to resolve the swap of its foreign debt, Argentina is also seeking an agreement with the International Monetary Fund to make payments on the US$44 billion loan that the organisation has been providing since 2018.

On the other hand, last week the Senate approved a project that seeks to initiate negotiations between the country and the holders of 41.714 million dollars of debt under local law.