By Carmen Reinhart (*) Argentina recently emerged from nearly 15 years of the most litigious sovereign default in modern times, if not ever. Now it has the opportunity to reenter the global financial system and build a more stable and prosperous future. It is a chance that the country must be careful not to squander.
Argentina announced on Tuesday the largest emerging market debt sale on record with a global offering of 16.5bn dollars at an average interest rate of 7.14%, well below what it had planned in March in the midst of negotiations to end litigations with holdout funds opening the way, after fifteen years, for the return to world money markets. Underwriters received 68.5bn dollars in orders for bonds, more than four times the value of the debt.
Argentina marked a spectacular comeback to world money markets on Monday when its first bond issue in fifteen years attracted bids more than three times reaching US$ 67 billion. Argentina is after US$ 15bn which will help pay creditors on its ongoing litigation, since the country defaulted back in 2001.
A judge sided with Argentina in its debt standoff on Wednesday, agreeing to let orders protecting creditors expire so that large U.S. hedge funds and smaller entities and people can be paid at least US$6.2 billion to satisfy settlements reached over the last month.
Argentina and a group of hedge funds are nearing a deal that would pay investors about 70% of what they say they are owed, as the government moves closer to re-entering the global bond markets following its 2001 default.
Argentina is planning to issue an estimated 15bn dollars in bonds, with which to pay the bondholders involved in years of litigation, and thus abandon its default situation which impedes it from having access to global money markets. The news was released by the Argentine Ministry of Finance.
The court-appointed mediator in the bonds dispute says Argentina has reached a settlement with bondholders seeking about 1% of the US$10 billion being pursued by investors. Mediator Daniel Pollack announced on Tuesday in New York the deal in the class action case. The deal came nearly two weeks after he announced two of six leading bondholders settled claims for more than US$1 billion.
Argentina announced Tuesday that it reached a $900 million preliminary accord to settle its pending debt with 50,000 Italian holders of defaulted Argentine government bonds. Finance minister Alfonso Prat-Gay said that the agreement with Italian bondholders includes the Argentine government's acknowledgement of the debt and reasonable interest.
Argentina's new president, Mauricio Macri, says he wants to start “a new era” in relations with Britain, long strained by the two nations' dispute over the Falkland Islands, according to remarks published Tuesday.
US judge Thomas Griesa on Friday accepted the priority repayment claims of hundreds more Argentine bondholders who did not join a huge debt restructuring. The ruling, on 49 complaints representing debt worth $6.1 billion, added fresh pressure on Buenos Aires which has refused to pay off two hedge fund creditors that already won court support for their claims.