No defaults forArgentina. The government of Buenos Aires has reached an agreement with the creditors for the restructuring of approximately $66 billion in foreign debt (just under 56 billion euros), thus avoiding a new bankruptcy. The agreement was announced by President Alberto Fernandez and Economy Minister Martin Guzman at the end of negotiations that lasted about four months.
The final agreement provides for a less heavy loss than expected for creditors, who will suffer a haircut of less than 50% (out of 100 dollars of debt, 54,8 will be repaid), instead of the 70% that was initially mentioned.
As regards the redemption of the bonds, the Argentine Treasury has obtained a more favorable rescheduling: the duration of the bonds issued in 2005, 2010 and 2016 was extended to 2029, 2030 and 2038 respectively. The payment schedule was also improved, which, for bonds maturing in 2030, will start in 2024.
Not only that: to repay the creditors of the unpaid portion of the debt, Argentina will issue new government bonds, with the possibility for those who held bonds in euros and Swiss francs to convert them into securities denominated in dollars.
The original proposal of the Argentine government, rejected by almost all creditors (including the giants BlackRock and Fidelity), envisaged a cut in capital of just 5,4%, but also a reduction in interest of 62% (with yields reduced from 7 to 2,3%) , which would have saved Buenos Aires about 42 billion dollars.
In any case, the final deal it saved Argentina from the ninth default in its history and the second in less than 20 years, after that of 2001. Now, once an agreement has been reached, all that remains is to define some legal clauses.
Meanwhile, the IMF predicts that the South American country's GDP will fall by a further 10% in 2020, aggravating a situation already compromised by the Covid-19 pandemic and high inflation.
