Buenos Aires Hours | Guzmán confirms 99% of external debt restructured in swap

Economy Minister Martín Guzmán revealed on Monday that 93.55% of bondholders under Argentina’s $ 66 billion foreign debt restructuring deal have accepted the government’s terms, activating collective action clauses to bring overall acceptance to 99%.

The Minister, speaking at an event at the Casa Rosada Bicentennial Museum, announced the news to the applause of President Alberto Fernández and many officials, including Vice President Cristina Fernández de Kirchner.

“Ninety-nine percent of the debt under foreign law has already been restructured,” Guzmán said. “There was a membership [to the exchange] by 93.55%, which, because of the collective action clauses, brings the restructuring to 99%.

“We got massive support from our creditors,” he added with a smile, saying the deal “put Argentina in a much healthier and more solid position” than when the government took office last December.

Argentina needed the approval of at least 85% of holders of all bonds issued in 2005 and 2010, and two-thirds of more recently issued securities for collective action clauses to take effect.

The news comes about a month after the government struck a deal with three major creditors’ groups to renegotiate the terms of the debt after months of tense talks and several missed deadlines.

The deal, reached on Aug. 4, is worth 54.8 cents on the dollar, a significant increase from the government’s initial offer of 39 cents.

Bonds represent about one-fifth of Argentina’s total debt of $ 324 billion, which is about 90 percent of its GDP. .

Last step

Monday’s announcement marks a key final step in the restructuring process after four months of intense negotiations with bondholders that resulted in a deal valued at an average of 55 cents to the dollar. Argentina pushed back its bond maturity dates and cut interest rates, giving the economy a better chance of recovery as it enters its third consecutive year of contraction.

Guzmán said the deal would allow the government to tackle other imbalances in the economy and provide Argentina with $ 37.7 billion in debt relief over the next decade. Interest rates on the agreement bonds had been reduced from seven percent to just over three percent.

“This gives us a sufficient economic calendar to generate sustainable policies and enable development,” Guzman said.

The minister also said the government’s next budget proposal, which would be sent to Congress “in the coming weeks”, would specify that next year’s budget deficit “will be around 4.5%”.

He also confirmed the government’s intention to seek a new deal with the International Monetary Fund (IMF), with payments on its $ 57 billion line of credit due in the coming months. Guzmán said the talks “would not be done behind the backs of the people, but would be debated in Congress,” he added.

The economy minister also called on Argentinian provincial governments to continue their own discussions to restructure dollar debt, saying they should “adhere to sustainability guidelines set by the national government.”

Argentina is also restructuring its external debt under local law. The early acceptance period for holders ends on September 1 and the results will be published before the transaction settlement date of September 4.

‘Lost his way’

The announcement, which began around 5 p.m., was eagerly awaited by markets, investors and the media, although officials informed over the weekend that the government was “optimistic” about the outcome of the exchange.

Many government representatives were present, joined by a number of provincial governors by video conference. Of those gathered in person, only three officials were without face masks most of the time: Fernández, Guzmán (as he spoke) and Fernández de Kirchner.

The president only gave a brief introduction before handing over to Guzmán, although he spoke at greater length and with some relief after the main news had been dealt with.

Describing the debt talks in a “maze”, in which foreign interests were linked to national interests, Fernández said Argentina had “lost its way” in the past two years, arguing that the country had really entered in default “in January 2018”. when the markets stopped lending to the country.

Argentina has officially been in default – the ninth in its history – since May 22, when the country missed a deadline to pay $ 500 million in interest on debt subject to debt talks.

Fernández said the pressure to reach a quick deal at all costs had been high and the government had “fought against two years of lies”.

“Government and bondholders can claim success here,” said Patrick Esteruelas, head of research at Emso Asset Management. . He added that the government will have the opportunity to build up hard currency reserves over the next few years, while investors can be reassured to come to a considerably better deal than what was initially offered to them.

While the government will still have to deal with bonds held outside the deal, the 99% foreign bond swap plan stands in stark contrast to 2005, when investors holding nearly a quarter of the bonds outstanding rejected the move. agreement that was offered to them. It created all kinds of headaches for Argentina, including a decade-long legal battle with billionaire Paul Singer’s Elliott Management that left foreign assets vulnerable to foreclosure and excluded the country from international debt markets. .

“Structural change”

President Fernández presented the moment as a campaign promise kept, having told voters on the trail that they would not bear the weight of Argentina’s debt.

“We no longer want to condemn Argentines to crawl,” he added.

Stressing that the deal was reached at the height of the coronavirus pandemic, the Peronist leader also warned that Argentina still had to “be able to comply” with its planned payments, saying it was essential to hand over the economy back on track.

“We have come out of the maze,” he said, calling on the country to learn a lesson this time around and not fall back into excessive debt in the future.

The country must now “produce, grow, export, accumulate reserves and then repay” the debt, he added, saying this would lead to “structural change”.

Fernández then thanked a host of European leaders for their support in the process, even going so far as to choose Pope Francis, saying the head of the Catholic Church had “silently” helped his country’s debt restructuring proposal. .

Fernández also thanked the director of the International Monetary Fund, Kristalina Georgieva, describing the upcoming negotiations with the Fund as “the other obstacle” to come.

Last week, the government formally called for talks to replace its financing agreement from 2018. Officials will only ask for enough money to refinance existing bonds, and the nation plans to continue paying interest during the talks. said the IMF’s executive director for the Southern Cone and Argentina’s representative to the Fund, Sergio Chodos, said recently.

– SCHEDULES / TELAM / BLOOMBERG

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