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Argentina debt deal set for high creditor support, few holdouts
August 31, 2020
BUENOS AIRES (Reuters) – Argentina’s debt restructuring deal is set to have received huge creditor support when the government unveils the results of the tender on Monday, though there are question marks over two individual bond series that may have fallen short.
The South American country’s government is scheduled to present the outcome of the deal at around 4 p.m. (1900 GMT) after months of tense negotiations, pushed deadlines and modifications to its offer helped strike an agreement with most creditors.
Reuters reported on Friday, when the deal deadline closed, that the government was confident of high creditor support for the deal.
A strong deal is key for Argentina, Latin America’s No. 3 economy and a major grains producer, to drag itself out of default and revive an economy that is in its third year of recession and expected to contract around 12.5% this year.
“We told Argentines that we would seek a debt settlement that does not hit those who suffer the most. And we are succeeding,” President Alberto Fernandez wrote in a post on Twitter.
“We are doing what we said we were going to do. Now, united, we are going to rebuild Argentina.”
The possibility that collective action clauses (CACs) may not be reached on some bonds raises the possibility of holdouts, though those are not expected to account for a significant portion of the overall debt pile or affect the wider deal.
The bonds being restructured have CACs that mean the government needs a certain level of support to restructure them. The older 2005 indenture bonds require a higher combined 85% of creditor support, with two-thirds on each individual series.
The anticipated strong support and few likely holdouts would stand in contrast to Argentina’s 2005 debt restructuring, which saw creditors holding around a quarter of bonds reject a deal, leading to over a decade of legal battles.
Roberto Geretto, economist at Banco CMF, said that a high participation level was basically assured, and that the only doubt was if all the 2005 bonds would reach the thresholds.
“In case the CACs cannot be executed on these bonds, there are two options: after a reallocation process some series of bonds may remain as holdouts, or become performing again if the government pays the unpaid interest,” he said.