South America

Fitch Ratings said it downgraded the province of Entre Ríos in central Argentina to C from CCC after the provincial government missed a payment on its 8.75% 2025 bonds, LatinFinance reported. Entre Ríos was scheduled to pay $21.9 million in interest on August 8, but it said on August 6 that it planned to renegotiate the 2025 bonds due to negative macroeconomic impact of the COVID-19 pandemic, Fitch said in a report on Wednesday. The province entered a 30-day grace period for the missed payment as it started the debt restructuring process, Fitch added.

Brazilian airline Azul SA said on Tuesday it had reached an agreement with its aircraft lessors that would help it save some 3.2 billion reais ($594.61 million) in working capital through 2021 and be repaid beginning in 2023, Reuters reported. The airline has been in negotiations with lessors as the coronavirus crisis derailed Latin America’s air travel industry in March. Azul hired a restructuring firm when the crisis set in and said it was renegotiating its debts out of court to avoid a potential Chapter 11 bankruptcy filing.

After reaching a $65 billion restructuring agreement in principle with its creditors earlier this month, Argentina must now turn to relief from the International Monetary Fund to free up cash in the near term, the IIF said on Tuesday, Reuters reported. “We think external financing will be comfortable if the IMF rolls over its exposure,” the Institute of International Finance said in a note. The agreement with creditors gives Argentina much-needed breathing space.

The national government wants Buenos Aires Province to be the first to resolve debt restructuring talks after its own sovereign bond agreement, according to sources with direct knowledge of the matter, the Buenos Aires Times reported. The government's strategy is to prevent debt restructuring talks from other provinces from complicating negotiations related to Buenos Aires Province. thus preventing creditors from demanding better conditions, said the individuals, who asked not to be identified because the negotiations are private.

Brazil's top four listed lenders are giving months-long extensions for consumers and companies to repay 235 billion reais ($43.98 billion) in outstanding loans, a move to give financially squeezed borrowers breathing room, the International New York Times reported on a Reuters story. The loans subject to forbearance programs, which range from 13% of Banco Santander Brasil SA's portfolio to 10% of Itau Unibanco Holding SA's, are an indicator of potential defaults.

Argentina's economy is likely to contract 12.5% ​​in 2020, a central bank survey of economists showed on Friday, a slightly more negative outlook than a month earlier as the impact of the coronavirus pandemic hammers the South American nation, the International New York Times reported on a Reuters story. The economic outlook in the monthly report polling 44 economists was down from a 12% estimated drop previously.

A Brazilian high court ruled on Thursday that the 11 billion reais ($2 billion) debt owed by bankrupt telecom Grupo Oi SA to Brazil’s telecommunications regulator Anatel will not get preferential treatment in restructuring negotiations, Reuters reported. The Superior Court of Justice, known as STJ, Brazil’s second-highest court, ruled that the debt was administrative and could not be given priority treatment. Brazil’s biggest fixed-line telecommunications operator filed for bankruptcy protection in June 2016. Oi had about 65 billion reais of debt at the time.

Ecuador is aiming to secure additional financing by the end of August to help plug its fiscal gap after wrapping up a deal to restructure $17.4 billion of debt, according to Finance Minister Richard Martinez, Bloomberg News reported. President Lenin Moreno’s administration is negotiating a new program with the International Monetary Fund as well as some $2 billion in bilateral loans from China. Martinez said the Asian Infrastructure Investment Bank is also considering a $50 million loan to support small and medium enterprises. “August is key,” Martinez said in an interview from Quito.

It took months of tough talks for Argentina to reach agreement on restructuring $65 billion (49.65 billion pounds) in debt, Reuters reported. Now, economists and policymakers say, the real work begins: reviving Latin America’s No. 3 economy from its currency and fiscal crises. Though both government and creditors celebrated Tuesday’s deal that should help Argentina avert a messy default, it still faces a 10%-plus contraction this year, an over-valued peso, spiking poverty and a deep fiscal hole.

Itau Unibanco Holding SA’s Chief Executive Candido Bracher said on Tuesday that next year he sees Brazil’s 90-day default ratio reaching higher levels than in previous crisis, Reuters reported. “Brazil’s GDP is poised to drop by unseen levels, so it is natural that there will be higher loan delinquency rates,”, Bracher told journalists in a conference call. Itau’s 90-day delinquency ratio reached a peak of 5.6% in 2009 and 4.8% amid a recession in 2016. Its second-quarter loan default was at 2.7%, but Bracher said he sees it going up next year, as grace periods extended to clients end.