Argentina makes opening move in debt talks
Argentina unveiled a proposal for a new debt restructuring today on some $70 billion in sovereign bonds.
The proposal, announced by Economy Minister Martín Guzmán, includes a three-year moratorium on debt service, a 62% reduction in interest payments, and a 5.4% cut in the value of the principal.
Final details were scheduled to be divulged Friday, effectively marking the beginning of what stands to be a contentious negotiation process between the two sides.
The recovery value implied by the proposal is about 30 cents on the dollar. That would be in line with the 70-75% "haircut" investors accepted in the last major restructuring in 2005 - after its then-record 2001 default.
Investors, Guzmán said, will have 20 days from the formal offer to accept the terms. Some, he revealed, expect 60 cents on the dollar from the center-left government of President Alberto Fernández.
Fernández, who took office in December, inherited twin economic and debt crises from his right-wing predecessor, Mauricio Macri.
The country's foreign currency-denominated public debt rose 141% in Macri's four-year tenure to $209 billion - with $34 billion owed to private and foreign creditors this year alone.
Argentina's GDP likewise fell a total of 6.6% since the "Macrisis" began in early 2018, as inflation more than doubled to 54%.
The ongoing Covid pandemic prompted Fernández to enact a nationwide stay-at-home order for non-essential staff on March 20, which has deepened the recession.
Even with stimulus - worth $11 billion thus far - the IMF estimated that Argentina's GDP may fall by another 5.7% this year.
At: https://www.bloomberg.com/news/articles/2020-04-16/argentina-asking-for-62-haircut-on-interest-payments
Economy Minister Martín Guzmán announces Argentina's preliminary debt restructuring proposal as Vice President Cristina Kirchner, President Alberto Fernández, Buenos Aires Mayor Horacio Rodríguez Larreta, and House Speaker Sergio Massa look on.
The mayor's use of a face mask dramatizes the ongoing Covid pandemic - which has hit Argentina's economy hard since a national stay-at-home order was issued on March 20.
Guzmán's restructuring proposal, the most far-reaching since a historic 2005 restructuring, is supported by the IMF - which agrees that Argentina's foreign debt is "unsustainable."
