Argentina agrees to pay $ 4.65 billion to settle long-standing debt

Published on: Amended:

Argentina has agreed to a $ 4.65 billion cash payment to its major recalcitrant creditors and will present the deal to Congress this week for a vote that would end 14 years of bitter legal battles.

The deal, subject to congressional approval and a payment slated for April 14, paves the way for Argentinaback on the global credit markets, and comes in a context of thawing relations with the International Monetary Fund (IMF).

Finance Minister Alfonso Prat-Gay has said he hopes to issue two or three new sovereign bonds in international markets for a total of up to $ 15 billion in April if lawmakers quickly back the deal.

The bonds would fund the payment to any recalcitrant creditors who had reached a deal, he said.

“This is a giant leap in this long-standing litigation, but not the last step,” said mediator Daniel Pollack.

The deal will see the four largest remaining recalcitrant creditors being paid 75% of the unpaid amount of their judgments, including principal and interest, Pollack said.

The hedge fund Elliott Management, headed by billionaire Paul Singer, has filed numerous lawsuits against Argentina.

The legal saga involved years of court battles, street protests in Buenos Aires, the seizure of a argentinian navy ship.

The predecessors of the newly elected Argentine president Mauricio Macri fought to avoid settling with recalcitrant creditors, who in turn blocked them from raising capital in international markets.

In a statement, Elliott said he was “satisfied” to have reached a deal giving him slightly better terms than the 72.5% agreed to by other investors earlier this month.

April 14 deadline

Argentina defaulted in July 2014 after former left-wing leader Cristina Fernandez refused to negotiate better terms than those offered in the bond swaps that followed the $ 100 billion default by the ‘Argentina in 2002.

Highlighting the bitterness of the dispute, Fernandez lambasted US District Judge Thomas Griesa, who oversees the cases as “senile” and called hedge funds “vultures.” Macri, a market advocate, made resolving the battle a priority after taking office in December.

January saw the start of weeks of marathon negotiations between creditors, Finance Secretary Luis Caputo and Pollack.

Prat-Gay said Argentina was taking the key step to remedy its default and Argentina was already in talks with banks over a further sale of debt in global markets.

“We hope that if Congress takes a decision quickly (…) we can probably go to the market in April,” Prat-Gay said at a press conference.

If payment is not made by April 14, 2016, the agreement could become null and void if both parties do not agree to an extension.

Holders rejected two previous debt restructurings in 2005 and 2010 that paid about 30 cents on the dollar. Investors who agreed to the deals have not received interest since July 2014, after Judge Griesa banned further debt payments until a deal was reached with the holdouts.

Healing the gap with the IMF

A final settlement would open up funding options for Macri as he tries to improve the country’s fiscal woes without imposing unpopular spending cuts. He was elected in November promising free market policies after eight years of protectionism under Fernandez.

Meanwhile, the IMF and Argentina have taken a step toward mending a rift that saw the country become the first member censored by the IMF.

The IMF on Monday released several of its recent assessments of Argentina’s economy that were delayed due to the breakdown, and said Buenos Aires had informed it of its intention to allow an official IMF review this year.

It also comes three years after the IMF officially censored Argentina for failing to meet its obligations to the fund, especially by providing accurate data on economic growth and inflation.


Comments are closed.