South America

Ecuador has acknowledged it will fail to make coupon payments on three bonds due later this week but insists it will pay up within the 30-day grace period, as it scrambles for cash amid the Covid-19 outbreak and the crash in oil prices, the Financial Times reported. In an online press conference on Monday night, finance minister Richard Martínez said the government would make a $325m payment due on Tuesday on its 2020 bond, but needed more time to come up with $200m to service bonds due in 2022, 2025 and 2030. Coupon payments had been due this Friday and Saturday.

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Argentina’s plans to restructure more than $100bn of private sector debt have been thrown into disarray by the coronavirus pandemic, which is threatening to plunge the country’s already struggling economy into an even deeper recession, the Financial Times reported. While the crisis that has hit global investments could make creditors less willing to compromise, analysts warn, it could also embolden the government to push for a harsher deal, raising the chances of a disorderly default.

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Ecuador’s Congress called on the government to suspend debt payments to free up cash to deal with the coronavirus pandemic, prompting JPMorgan Chase & Co. to warn of a potential default as soon as Tuesday, Bloomberg News reported. The South American nation’s $3 billion of bonds due in 2028 fell 3.5 cents to a record low 31 cents on the dollar, pushing yields to 33%. Ecuador has about $320 million of debt due tomorrow and coupon payments later this week.

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Agitating bondholders have written to Argentina’s government, accusing it of not doing enough to allow the country’s crucial debt restructuring negotiations to make progress, according to bondholder sources involved in the process, Reuters reported. Two sources told Reuters on the condition of anonymity that the three main creditor groups had sent letters in recent days saying that they wanted to contribute to an “orderly resolution” of Argentina’s debt challenges. However, the creditor groups said they were concerned there was “a shortfall in collaboration” on the part of the government.

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The bonds of emerging-market nations are entering distressed territory at an alarming rate as the soaring dollar raises the prospect of government defaults, Bloomberg News reported. Fifteen nations with more than $100 billion of Eurobonds outstanding now have average spreads of at least 1,000 basis points over U.S. Treasuries, which many investors consider to be the threshold for debt to be classed as distressed. And that doesn’t even include Lebanon, which defaulted this month, and Argentina, which has begun restructuring talks with bondholders.

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Even in an industry devastated by the coronavirus crisis, Latin American airlines stand out. Five of the biggest carriers in the region -- Latam Airlines Group SA, Gol Linhas Aereas Inteligentes SA, Azul SA, Avianca and Volaris -- have seen about $12 billion in their market value wiped out since the end of January through Wednesday’s close, Bloomberg News reported. On average, their stock tumbled 78% in local currency terms, more than all 23 members in the Bloomberg World Airlines Index. The global gauge is down 46% in the period.

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Latin American airlines need prompt government aid or many of them could go out of business as the global coronavirus outbreak forces widespread flight cancellations, the chief of regional airline association ALTA said…However, Chile’s economy minister dismissed the idea of providing aid to the country’s flagship carrier, the largest in the continent, Reuters reported.

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Argentina's government has struck a deal with domestic bondholders to swap around 200 billion pesos ($3.2 billion) in local currency debt in a major planned auction on Thursday, the country's Economy Minister Martin Guzman told Reuters. The scheduled swap, which is offering new instruments that expire between 2021 and 2024 for others maturing up to this year, is part of Argentina's drive to gain more time to make payments amid a widespread debt crisis, the International New York Times reported on a Reuters story.

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Argentina will need “substantial relief” as it restructures nearly $70 billion in debt with international bondholders, the country’s economy minister Martin Guzman told Reuters, signaling a tough tonic ahead for the country’s creditors, Reuters reported. In his first interview with international media since taking up his role in December, the 37-year-old U.S. trained economist, said a March 31 deadline to strike a deal with bondholders may also be affected by a global coronavirus outbreak that was hitting plans for road shows for the government’s debt proposal.

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A plunge in world oil prices and resulting market turmoil has thrust Latin American governments into the unenviable position of trying to shore up their economies without blowing a hole in their budgets or scaring off international investors, Reuters reported. From Mexico to Brazil, many countries in the region are major exporters of crude and other commodities, and have been hit by a triple whammy of oil’s price crash, cratering import demand from major buyer China, and a precipitous fall in their exchange rates.

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