Default 9.0

20 April 2020 By Anna Szymanski Follow @Three_Guineas

BlackRock and other creditors have come out against the serial defaulter’s plan to restructure some $66 bln in debt. New legal protections should help their cause, and a messy default could attract holdouts. But time is their biggest advantage: Argentina needs money.

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Argentina owes around $500 million in interest payments on hard-currency bonds on April 22. The country will trigger a default if it fails to make this payment and a 30-day grace period expires.

Various creditor groups on April 20 publicly criticized Argentina’s offer, unveiled in detail three days earlier, to restructure around $66 billion of foreign-law hard-currency bonds.

The proposal indicates over $40 billion of debt relief, mostly from reduced interest payments. The government says the overall coupon reduction will be 62%, with a 5.4% capital cut. The actual reductions in coupon and capital vary depending on the instrument. For example, the new U.S. dollar bonds maturing in 2030 would accrue interest at a rate of 0.5% from 2022 to 2025, 1% from 2025 to 2027 and 1.75% from 2027 to 2030.

Argentina is offering to exchange creditors’ current bonds for new paper that would mature later, between 2030 and 2047, according to the government press release. Argentina would pay no interest or principal until 2023.

On April 17, Fitch Ratings downgraded the country’s long-term foreign-currency issuer default rating to C, indicating that a distressed debt exchange process has started.

Argentina’s total debt pile is $323 billion, according to Reuters.

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