Argentina clinches deal with creditors to restructure $65 billion debt, bonds rise

[sandensea]

Source: CNBC

Argentina’s government announced early Tuesday morning it had reached a deal with creditors to restructure $65 billion in sovereign debt, drawing a close to months of negotiations rife with gridlock and disagreement.

Three creditor groups — the Ad Hoc Group of Argentine Bondholders, the Exchange Bondholder Group, and the Argentina Creditor Committee — will now help Argentina to restructure its debt and offer it significant debt relief.

Latin America’s third-largest economy, already in default, has for months left billions of dollars worth of bonds in default as its economy is hammered by the coronavirus pandemic.

Rising poverty and unemployment, as well as soaring interest rates amid an already two-year-long recession, had the country of roughly 45 million in dire financial straits even before the virus hit.

Read more: https://www.cnbc.com/2020/08/04/argentina-clinches-deal-with-creditors-to-restructure-65-billion-debt-bonds-rise.html

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Argentine President Alberto Fernández and Economy Minister Martín Guzmán during a recent conference call with bondholders.

Today's agreement would allow Argentina to emerge from default, push most payments past 2025, save over $30 billion in upcoming interest payments, and potentially re-enter global credit markets.

Guzmán's restructuring proposal, amounting to 54.8 cents on the dollar, is supported by most international observers as well as the IMF.

[Roc2020]

1. Yup. The obvious coming train wreck

most want to hide from. The time bomb of astronomical debt and printing of money that many want to pretend isn't ticking away.

[sandensea]

7. If the GOPee ever manage to ruin global trust in the dollar, that may indeed happen here

Bush almost did - but the world decided to stick with the dollar (thank goodness).

The sad thing in Argentina, is that Macri's debt bubble didn't for the most part go toward monetary emission - but instead to cover the dollarization of local assets by elites (and some foreign hedge funds looking for a quick 15% return), and their subsequent offshoring.

His own father used to complain that young Mauricio never appreciated proper money management - just get-rich-quick schemes.

Like someone else we know...

[Javaman]

3. I'm sure the general population is just fine with this, right?

"Guzmán's restructuring proposal, amounting to 54.8 cents on the dollar, is supported by most international observers as well as the IMF."

invest in wheelbarrows, they will be the next wallet.

[sandensea]

5. Affected bondholdrs are mainly foreign banks & hedge funds. But even they agree this is for the best

These bonds - which are already in default since June - have been trading at around 45 cents on the dollar - so the payout is actually an improvement over current market conditions, and are boosting the value of the bonds themselves.

If the bonds recover to par value - which they were at before Trump's friend Macri ran the country deep into debt in 2016-19 - they'll make even more on their investment.

It's also worth noting that the agreement includes almost no principal reduction ("haircut" ) - but rather, a sharp reduction in interest payments. In that sense, it's a lot like refinancing your 7% mortgage to take advantage of today's 3.3% rates.

[mpcamb]

4. Hedge fund billionaire Paul Singer's ruthless strategies include bullying CEOs, suing governments an

Hedge fund billionaire Paul Singer’s ruthless strategies include bullying CEOs, suing governments and seizing their navy’s ships. Paul Singer, the founder of Elliott Management, is perhaps most notorious for its 15-year battle with the government of Argentina, whose bonds were owned by the hedge fund.

...from a June 9, 2017 article.

[sandensea]

6. +1

Singer was used by neo-cons to ruin Argentina's recovered creditworthiness during the center-left Kirchner era (2003-15).

But also to punish the country for its very successful 2005 restructuring (thus discouraging other severely indebted 3rd world nations from trying).

Foreign bondholders, who were collecting on time and in full, simply had their payments impounded in 2013 by a now-dead Nixon judge (reputedly bribed to do so).

At least those holding U.S.-law bonds did, since vulture fund practices are illegal in most of the rest of the world. These are the same type of bonds now being restructured, to prevent such gambits in the future.

Singer eventually "won" his 1180% payout thanks to Macri's narrow election 2015 - seen as a major victory for neo-cons at the time, but not once Macri turned out to be a liability and geopolitical embarrassment.

No surprise to those of us familiar with Argentine politics, seeing as the man named his party (the PRO) for the fascist 1976 dictatorship (the 'Proceso').

They're the ones who bankrupted the country in the first place - using the same borrow-and-offshore heist.