Argentina Agrees With Key Creditors On $65 Billion Debt
The government of Argentina has agreed with three key groups of creditors of the country on the terms of restructuring the national debt for a total of $65 billion.
The breakthrough in the talks came a few months after they began, and at one point it seemed that there would be no agreement, the FT writes.
In a statement issued by the Argentine government on Tuesday, it said that the agreements reached "will allow members of creditor groups and other bondholders to support the country's debt restructuring proposal and provide Argentina with a significant reduction in its debt burden."
Holders of Argentine bonds will have to vote on the government's proposal to restructure the debt, and there is still a possibility that one of the investors will decide to block it. However, if it gains sufficient support, Argentina will be able to avoid the worst-case scenario, which includes closing the country's access to international capital markets for many years, as it did after its default in 2001.
Argentina's ninth default
In May 2020, Argentina was in default for the ninth time in its history, having failed to make interest payments totaling about $500 million on three government bond issues on time. The technical default, however, did not result in immediate legal action by creditors, who continued negotiations with the government.
Investors in Argentina's key creditor groups include BlackRock, Fidelity, T Rowe Price, VR Capital Group, and Monarch Alternative Capital.
Argentina offers bondholders to exchange outstanding securities for new bonds with a longer maturity. As part of the agreement reached with creditors, the government promised to " adjust the timing of payments on new securities." This will improve conditions for holders of securities, but will not lead to an increase in the total amount of payments on bonds that Argentina undertakes to make as part of its offer to creditors, the government said in a statement.
The debt restructuring will allow Argentina to resume negotiations with the International Monetary Fund (IMF), which provided the country with $44 billion in loans during the currency crisis in 2018. Argentina hopes that it will be able to agree with the IMF to defer payments on loans due in 2021-2023, which will allow the country to avoid the need for fiscal austerity.