Argentina has delayed payment on roughly $9bn in dollar-denominated debt for the second time in five months, pushing off payment until August 31 while calling on bondholders to show “good faith” in talks to restructure the country’s massive debt pile, the Financial Times reported. The government was due to repay $67m on Friday and an additional $280m on Monday for the local notes, known as Letes, according to local newspaper Clarin. These short-term bonds are sold by the country’s Treasury to individuals and companies.
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As Argentina looks set to restructure its debt, bondholders are trying to grasp the implication of two words written into most bond sales worldwide since 2014. The debate is around a “uniformly applicable” rule that sits in the collective action clauses (CACs) that comes into play in case of a debt restructuring, Bloomberg News reported. If the government chooses to sign a single accord with bondholders, the clause implies all investors have to be treated the same -- whichever bond they hold and whatever its current value.
Argentina’s nine-day-old government has moved quickly to sidestep a debt crisis, appealing to bondholders including Pacific Investment Management Co. to roll over maturing debt, Bloomberg News reported. Finance Secretary Diego Bastourre and his deputy, Ramiro Tosi, met with Pimco officials and local bondholders on Dec. 18 to persuade them to accept new notes in exchange for 24.5 billion pesos ($410 million) of bonds maturing on Monday, according to three people with direct knowledge of the matter.
The left is back in control in Argentina now that Alberto Fernandez has taken office as president, succeeding the pro-market Mauricio Macri. The Peronists may have returned with an orderly transition, but Fernandez faces an economic and financial crisis and is on a collision course with the IMF, The Conversation reported. This stems from the “turbulence” of April 2018, in which the peso devalued 11% against the US dollar in less than a week amid rampant inflation, a recession, high unemployment and wider worries about emerging markets within the global economy.
Argentina, the world’s biggest seller of processed soybean meal and oil, raised export taxes on Saturday as the government seeks to fund spending under new President Alberto Fernandez, Bloomberg News reported. After the peso’s 37 percent slump this year, his administration is replacing a levy of 4 pesos per dollar for many exports with a fixed charge of 9 percent, according to a decree in the official gazette.
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The IMF is waiting for the details of the new Argentine government’s economic plans to review its $56 billion credit line, its chief spokesman said, Bloomberg News reported. “I don’t have anything on dates or planned meetings,” with Argentine officials over the $56 billion loan, the International Monetary Fund’s Gerry Rice said yesterday. Economy Minister Martin Guzman had said on Wednesday that he had held a preliminary meeting with IMF Managing Director Kristalina Georgieva before taking office.
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Argentina President Alberto Fernandez said that the country is willing but unable to pay its debts under current conditions and needs the economy to grow again before meeting its obligations, Bloomberg News reported. The government will seek “constructive and cooperative” dialogue with the International Monetary Fund and bondholders to address the debt load, Fernandez said, without giving additional details. The outgoing administration of Mauricio Macri left Argentina in “virtual default,” he said.
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Argentine soy crushing giant Vicentin is struggling to repay over $350 million in debt and some plants are likely to halt production while it seeks relief amid an economic slowdown in the country, a source close to the firm said on Thursday, Reuters reported. The grains crusher, Argentina’s top exporter of processed soy last year according to government data, said it had been hurt by increasing financing costs and rising country risk, and was looking at how to meet its obligations.
Bondholders are gearing up for a nasty fight as Argentina’s largest province stares down a debt payment it may not be able to make, Bloomberg News reported. The Province of Buenos Aires will owe investors $571 million in January, and is unlikely to be able to come up with the cash amid a sharp devaluation in the currency and severe economic recession. The region has few dollar-generating industries, and tax revenue has dropped 14% in inflation-adjusted terms this year. Refinancing isn’t a realistic option amid plans by the federal government to restructure its debt.