Argentina made what it called a “final offer” to its creditors hoping to break a deadlock in the country’s $65 billion debt restructuring negotiations. To add to the debt headache, last week the government again failed to make an interest payment, this time $95 million due on two foreign-law bonds. The Argentinian peso continues to under-perform as USD/ARS sold-off by 2.1% over the past month to 71, noting the black market rate is far weaker than this official number.
The new proposal would shorten the maturities on the new bonds (until 2046), interest payments would begin in September 2021, and holders of bonds issued in 2005 and 2010 would now be able to exchange for new bonds issued under the same indenture. A group of Argentina’s biggest creditors which includes major asset managers such as BlackRock and Fidelity restated that they are willing to strike a deal if the government agrees to provide stronger legal protection against a another default. Creditors have been given until August 4 to approve the new terms.
An agreement is far from entirely solving the Argentinian’s debt structure, which stands at $311 billion, or 90% of its GDP. The economy is expected to contract c.10% this year amid a strict quarantine, rising unemployment and inflation of about 40%. Argentina is exposed to serious capital flight from investors if the substantial deterioration in market accessibility persists.