South America

The World Bank has piled pressure on commercial lenders to defer debt repayments owed by emerging economies as the impact of the coronavirus pandemic threatens to plunge them into a “lost decade,” the Financial Times reported. The body’s president David Malpass said he was “frustrated” that some countries could cut back spending on health and education to meet debt repayments, creating a long-term drag on their economic prospects.

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Venezuela’s finance minister on Tuesday offered to speak with bondholders about a potential renegotiation of the cash-strapped country’s debt, which economists and financial industry sources said would face challenges due to U.S. sanctions, Reuters reported. The OPEC nation in 2017 suspended payments to holders of many bonds issued by the government, state oil company Petroleos de Venezuela and utility Electricidad de Caracas, and sought to initiate a restructuring process.

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Avianca Holdings on Tuesday said it had appealed a court order that last week banned Colombia’s government from providing the troubled airline with a $370 million loan to finance part of its bankruptcy restructuring, Reuters reported. The airline, which filed for bankruptcy in May due to the coronavirus pandemic’s effect on travel, said that without the loan, keeping the company afloat would become “untenable.” The loan is part of a $2 billion financing package that is key to the carrier exiting bankruptcy protection.

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Despite one of the world’s longest and strictest lockdowns, the death toll in Argentina keeps rising. The increase in daily deaths from Covid-19 is the sixth highest in the world. More than 10,000 people have died so far. Argentina’s rate of about 234 deaths per million is still lower than its big neighbours — in Brazil and Chile, that rate exceeds 600 deaths per million — but the economic consequences of its lockdown have been especially dire, the Financial Times reported.

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A Colombian court temporarily blocked a $370 million government loan to Avianca Holdings SA after a citizen expressed concern about a lack of guarantees, Bloomberg News reported. The Cundinamarca Administrative Tribunal granted an injunction to suspend disbursement after a motion filed by a citizen against the Finance Ministry, the presidency and the airline said the loan, part of its debtor-in-possession financing, may become a “threat” to collective rights and public worth, according to a copy of the ruling sent by court.

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A U.S. bankruptcy judge on Thursday rejected a $2.4 billion financing plan for struggling LATAM Airlines on the grounds that a convertible loan included as part of the package would amount to “improper” treatment of other shareholders, Reuters reported. The move is a setback for LATAM, which needs short-term liquidity. But in a lengthy court decision, the judge left the door open for the Chilean carrier to introduce a similar financing plan in the future, this time without the possibility of converting part of the loan into equity. The airline had no immediate comment on the decision.

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Coronavirus Tips Brazil Into Recession

Brazil’s economy has officially entered a recession following the swingeing impact of the coronavirus crisis, which has so far killed more than 120,000 Brazilians and pushed millions into unemployment, the Financial Times reported. According to the Brazilian Institute of Geography and Statistics, gross domestic product shrank 9.7 per cent quarter-on-quarter, reflecting the effect of widespread economic shutdowns, which have hammered consumption and investment and triggered a wave of corporate bankruptcies. Compared with the same quarter last year, GDP was 11.4 per cent lower.

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Argentina has defused fears of a messy default after it gained backing from creditors, allowing it to exchange 99% of the bonds involved in a $65 billion restructuring, a deal that could set a precedent for future sovereign crises, Reuters reported. After months of winding and tense negotiations, framed by the coronavirus pandemic, bondholders tendered 93.55% of the eligible bonds in the exchange, Economy Minister Martin Guzman said at a news conference on Monday.

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After four months of tense debt talks, multiple pushed deadlines and amendments since an initial low-ball offer in April, bondholders will decide on Friday whether to accept the country’s $65 billion restructuring proposal, Reuters reported. The main three creditor committees holding a large chunk of the bonds backed a deal earlier this month, bolstering confidence that the government will get the required level of support to allow a full deal to go ahead without holdouts.

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The International Monetary Fund agreed to lend Ecuador $6.5 billion which will allow the nation to complete a bond restructuring plan and fund its 2020 budget, Bloomberg News reported. The deal announced Friday will enable the exchange of $17.4 billion of debt to go ahead before the Sept. 1 deadline. The country had agreed with bondholders that it would seek a new IMF deal, and that the restructuring wouldn’t go ahead without one.

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