Argentina strikes deal with creditors over $65bn debt in major breakthrough
Argentina has reached a deal with its largest creditors to restructure $65bn (£50bn) in defaulted sovereign debt, in a major step forward in long-running talks.
The South American country’s government hailed the breakthrough, saying in a statement that it will “grant Argentina significant debt relief”.
Argentina’s economy has been battered in recent years by high levels of debt and successive government defaults. In May, the country defaulted for the ninth time after talks with creditors broke down.
It has now also been hit hard by the coronavirus pandemic. The economy is expected to shrink by an enormous 12 per cent this year.
The country had been at loggerheads with investors which include Blackrock and Ashmore. An earlier deal to restructure $65bn of foreign debt failed to secure enough support among investors in May.
The new agreement has been struck between the government and the Ad Hoc Group of Argentine Bondholders, the Argentina Creditor Committee, the Exchange Bondholder Group and other major holders.
It will now be put to the other investors for approval. Argentina will extend the deadline for talks until 24 August so the deal can be finalised.
Investors cheered the deal, with the country’s existing eurobonds rising as much as three cents.
Rocky road to restructuring
South America’s third-largest economy could be spared the ignominious fate of being locked out of global credit markets. That is, if the deal can gain the approval of enough creditors.
The country’s public debt is around 90 per cent of GDP. And it is likely to climb as it seeks to deal with the coronavirus crisis.
Argentina’s borrowing costs have soared since it became clear leftist politician Alberto Fernandez would become President, as he did in December.
Talks over the restructuring of the debt have been tense and drawn-out. Fernandez and his economy minister Martin Guzman rejected proposals from bondholders but gave some ground by making quicker-than-expected payments.
Under the deal, the government would adjust some of the payment dates for the new bonds offered in July. It will not raise the aggregate amount of principal or the interest payments but makes the proposal more attractive for creditors, Argentina said.