Argentina

Argentine bondholder groups slammed the government on Thursday over economic policies they said were undermining investor confidence in the country, which emerged from a sovereign default in September after a $65 billion restructuring, Reuters reported. Two of the groups involved in that debt revamp said in a statement that policies since then had “failed to restore confidence” and instead had “dramatically worsened the country’s economic crisis.” Bond prices have dropped sharply since the exchange.

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Investors are giving up on Argentina just six weeks after it pulled off a $65 billion restructuring, Bloomberg News reported. The country’s overseas bonds have plummeted more than 20% since early September, the world’s biggest drop in that span. Morgan Stanley calls it the worst rout in the aftermath of a restructuring in at least 20 years, and it comes despite the nation winning a whopping $38 billion of debt relief from creditors. Those same investors have been dismayed at what followed.

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Countries do not usually gain friends when telling creditors they can’t pay them back. Yet Ecuador earned serious plaudits as it went about restructuring $17.4bn of bonds this year, GlobalCapital reported. The Ad Hoc Bondholder Group that owned more than half of the sovereign’s bonds even said that the process “set a precedent” for Covid-19 era restructurings. Jan Dehn, head of research at Ashmore, part of the Ad Hoc group, explains that on one hand the group was referring to modifications in collective actions clauses that some creditors hope will become standard practice.

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An International Monetary Fund mission concluded a visit to Argentina on Sunday, after several days of preliminary talks aimed at repaying about $44 billion owed by the cash-strapped government to the fund, a government source said, Reuters reported. The delegation of IMF economists arrived early last week, led by Julie Kozack, Western Hemisphere deputy director for the IMF. “This first visit has concluded,” the government source told Reuters on condition of anonymity. Argentina recently restructured about $100 million in non-performing bonds.

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Nearly half of Argentina’s population was living in poverty in the second quarter, a sharp increase from last year, as the country’s longstanding economic crisis deepened due to the coronavirus pandemic, researchers estimated on Wednesday, Reuters reported. The Catholic University of Argentina (UCA) estimated the poverty rate spiked to between 46% and 47% by the end of June following months of strict lockdowns to battle the spread of the virus.

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Argentina will make interest payment due on dollar and euro-denominated “Par” bonds on Wednesday this week, the country’s Economy Ministry said in a statement on Monday, closing off an unresolved issue from its recent major debt revamp, Reuters reoprted. The government had failed to restructure a small number of bonds, including the Pars, as part of an otherwise successful $65 billion foreign debt restructuring, which saw 99% of eligible debt exchanged at the end of last month.

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Argentina’s newly restructured dollar bonds have slumped in value less than a month after a deal was finalised to postpone debt payments, as fears grow about the country’s economic health, the Financial Times reported. On August 31, Argentina clinched near-unanimous approval from its bondholders to restructure $65bn of foreign debt after months of sparring. The country’s sovereign bonds began trading this month, and have already fallen towards distressed levels.

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Argentine companies are facing an increasingly difficult task to keep up with payments on dollar debt, hiking the risk of a wave of corporate defaults after the country tightened access to foreign currency to stem a sharp decline in reserves, Reuters reported. The central bank move, which pressured firms to restructure their debts and tightened individuals’ access to greenbacks, jolted local markets, pummeled bond prices and equities and heightened demand for black market dollars.

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Less than a month after Argentina’s $65 billion debt restructuring, bond prices show growing concern the government may struggle to pay its obligations, Bloomberg News reported. The country’s yield curve has inverted in the week since officials announced foreign-exchange restrictions to help conserve cash. Investors perceived the move as an act of desperation instead of a workable solution to stem the drain in foreign reserves, and prices for short-term bonds dropped.

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