MercoPress. South Atlantic News Agency

Argentina deal with bondholders was at 54,8 cents to the dollar; next step IMF negotiations

Argentina’s Kirchnerite government made an aggressive initial proposal to bondholders in April that was quickly rejected.

Argentina is battling to escape from a messy ninth sovereign default as it firefights recession, stubborn inflation, and increasingly wary investors. The country announced on Tuesday it had reached an agreement with creditors to restructure around US$ 65 billion in foreign debt, breaking a deadlock over recent weeks and setting the stage for a formal deal later this month.

But this is not the end of the story, since Argentina now has to renegotiate a US$ 57 billion loan of which it used some US$ 44 billion, reached with the IMF in 2018.
Argentina’s Kirchnerite government made an aggressive initial proposal to bondholders in April that was quickly rejected.

After winding talks, the government made a “final” offer in early July, calculated to be worth near 53.5 cents on the dollar. Creditors rallied behind a counterproposal demanding around 3 cents more.

After last-ditch talks between the government, creditors and advisers, the two sides zeroed in on a deal worth around 54.8 cents, with tweaks to legal clauses that bondholders were seeking.

The government has set a deadline for creditors to formally accept the amended proposal on Aug. 24, after which new debt would be issued in early September.

Argentina has a total debt pile of US$ 323 billion, around 90% of gross domestic product. The majority of public debt is in foreign currency.

Argentina is negotiating with the International Monetary Fund to strike a new agreement to replace a landmark US$ 57 billion financing deal struck in 2018. Argentina has already received around US$ 44 billion under that deal.

Argentina also owes the Paris Club creditor group US$ 2.1 billion that was originally due in May. It has made use of a one-year extension on the payment and is looking to renegotiate the debt with the group of country lenders.

A bill to restructure the country’s foreign currency debt issued under local law is currently going through Congress.