Preliminary deal reached between Argentina and bondholders
Sources from Argentina's Economy Ministry diclosed today that a preliminary deal has been reached with investors holding some $66 billion in foreign currency-denominated Argentine bonds issued under U.S. law.
The announcement came after a meeting this morning between President Alberto Fernández, Economy Minister Martín Guzmán, and representatives of the hard-line Ad-Hoc bondholders group led by hedge fund giant BlackRock.
According to market sources, the meeting point between the two parties was set, measured in net present value, at USD54.3 per 100 dollars of face value - almost one dollar above the last official offer.
The preliminary agreement comes on the eve of a mutually-agreed August 4th deadline - two months after the country was declared in partial default.
It would allow Argentina to activate a general exchange with other affected bondholders and save $30 billion in interest payments over the next seven years.
Both Argentina and its bondholders have made significant concessions since negotiations first began:
Between the country's first offer on April 16 and July 6, Guzmán improved the recovery value offered to creditors from 39 dollars to 53.5 at net present value. The BlackRock-led Ad-Hoc group, in turn, initially proposed a 90 dollar payout.
Argentina has struggled to service its foreign currency-denominated public debt - which nearly tripled to $250 billion under the right-wing Mauricio Macri administration (2015-19).
A "Macrisis" recession that began in April 2018 intensified amid the ongoing Covid-19 pandemic, with GDP collapsing by 20.6% annually as of this May.
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Argentine President Alberto Fernández (right) and Economy Minister Martín Guzmán during a recent conference call with bondholders.
If confirmed, today's preliminary agreement would allow Argentina to emerge from default, save over $30 billion in upcoming interest payments, and potentially re-enter global credit markets.
Guzmán's restructuring proposal is supported by most international observers as well as the IMF - which agrees that Argentina's foreign debt is "unsustainable."
