Argentina Reaches Deal with Three Creditor Groups to Break the Deadlock

Highlights

  • Latin America’s third largest economy is making its way to economic recovery after two years of recession
  • The deadline is extended to August 24 for the creditors to accept the new deal
  • The news helped lift the government’s existing Eurobonds by as much as 3 cents

Rise from Recession

To break the impasse that had been prevailing in the country for quite a long time, the Ministry of Economy of Argentina on early Tuesday reached an agreement with three creditor groups to restructure $65 billion in sovereign debt. The new deal will grant a significant debt relief to the country.

Consequently, the nation’s existing eurobonds rose by as much as 3 cents. The country had been in recession for the past two years.

The agreement would put an end to seasons of talks between the government and the three creditor groups- the Ad Hoc Group, Argentina Creditor Committee and the Exchange Bondholder Group.

There was no immediate confirmation from the creditors. However, the investors were cheered upon hearing the new deal.

“It is good for bondholders to be able to put this behind them and good for Argentina as it can return to a clean sheet. It helps for creditors on the NPV (net present value) but not a lot, and means Argentina will eventually be able to return to financial markets when needed”said one of the beholders in the Euromarkets.

The new deal

The payment dates on the New Bonds under the new deal will be January 9and July9 instead of March 4 and September 4. The New Bonds to be delivered as Accrued Interest Consideration and Additional Consent Consideration will begin amortizing in January 2025 and mature in July 2029. The New USD and EUR 2030 Bonds will begin amortizing in July 2024 and mature in July 2030, with the first instalment being in an amount equivalent to one half of each remaining instalment and the New USD 2038 Bonds and New Euro 2038 Bonds to be issued in exchange for existing discount bonds will begin amortizing in July 2027 and mature in January 2038.

The country had been facing poverty and unemployment even before the striking of the virus and the outbreak only worsened the scenario. On May 22,  Argentina witnessed its ninth sovereign debt delinquency after missing overdue interest instalments.

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