(Bloomberg) — Buenos Aires received enough credit from creditors to restructure 98% of its $7.1 billion in external debt, bringing Argentina’s largest and most populous province one step closer to ending a 16-month default.
The province, also the wealthiest in the country, will exchange all of the bonds it offered to redeem, except for portions of dollar-denominated notes due 2021 and euro-denominated bonds due 2020, which were issued under rules requiring a higher amount of creditors requirements. participation to attract all holders. According to a statement, the deal will close on September 3.
The exchange marks a success for Buenos Aires Governor Axel Kicillof, who was known half a decade ago as Argentina’s economy minister for his row with investors, and his strategy of structuring the deal in a way designed to deter creditors. from holding it out. It also brings the latest round of debt restructuring in Argentina closer, after a sharp economic contraction, exacerbated by the pandemic, prompted nearly every province to restructure its liabilities over the past 12 months. The national government traded $65 billion worth of securities a year ago.
“It’s another deal to kick the eye out and give the economy time to recover and recover,” said Walter Stoepplewerth, Chief Investment Officer at Portfolio Personal Inversiones in Buenos Aires. “It prevents nasty lawsuits that could have hampered the province’s access to multilateral loans.”
The deal will save the province $4.6 billion through 2027, money that can be used for infrastructure and social spending, Buenos Aires Economy Minister Pablo Lopez said at a news conference.
The county’s new bonds mature in 2037 and are valued at about 51 cents per dollar. Creditors who have accepted the deal will also receive a cash payment of 10% of the interest accrued during the default, and the remaining 90% will be tacked onto the principal amount of the bonds.
The bond deal was structured to take advantage of class action clauses written into the rules of the bonds that could force investors to participate in the swap if enough holders vote in favor of the deal. Buenos Aires offered significantly worse terms for creditors who voted against the deal, but they were swept along anyway, providing an important incentive to vote yes.
Home to nearly 18 million people and accounting for two-fifths of Argentina’s gross domestic product, Buenos Aires has been in default since April 2020. On Aug. 26, the county said it was receiving support from holders of more than 90% of its bonds, including GoldenTree Asset Management, the largest creditor.
Lopez did not specify what percentage of holders of the $900 million bond maturing in 2021 and of the $95 million bond maturing last year declined to participate in the deal. He said regulations in some creditors’ countries may not have allowed them to participate.
“It’s very recent, we need to analyze what happened and what the problem was,” he said.
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