Argentina unveils foreign debt restructuring proposal
BUENOS AIRES, Argentina (AP) — Argentina unveiled its debt restructuring proposal Thursday, saying it is willing to pay back less than 40 cents for every dollar invested by private creditors in foreign debt securities and that payments would begin in 2023.
Economy Minister Martin Guzman laid out the framework to restructure roughly $70 billion in debt as the South American country grapples with a biting recession and the coronavirus pandemic.
The plan consists of a 62% reduction in interest payments equivalent to $37.9 billion and a 5.4% capital reduction worth $3.6 billion. The offer includes a three-year grace period to start payments with interest rates of 0.5%, which would rise from there to sustainable levels.
“This is what Argentina can fulfill. We are not signing blank checks or papers that we are not going to be able to fulfill,” said center-left President Alberto Fernández, accompanied by former president and current vice president Cristina Fernández.
The offer needs to be accepted by 70% of investors and Argentina's government gave them 20 days to decide. If the proposal is not accepted, Argentina will move towards a default, its second in 20 years.
“Six or three months ago, around then, it wasn't an interesting offer, but today it can provide an outlet (for creditors) and limit the damage that exposure to Argentina can cause” in the current context of the pandemic, said Jimena Blanco, chief economist for Latin America at risk analysis consultancy Verisk Maplecroft. “The underlying discussion has changed because not only Argentina's outlook has changed."
The announcement came with Argentina under a mandatory quarantine due to COVID-19 and in a recession with high inflation and 35.5% of the population in poverty even before the pandemic.
“It is our decision that the debt's payment not suppose more postponements for Argentina," said the president. “We also set out to be serious and not take advantage of the situation of the coronavirus, which has overturned the world economy, to delay the solution of this problem,” he said.
Blanco warned that some investors might hinder the restructuring.
“The judicial path remains an alternative for large bondholders ... it has to be a bondholder who is willing to play a fairly long game and take that risk,” she said.
