Argentina‘s government made a proposal to restructure its $83 billion debt with private creditors issued under foreign legislation. The country asks investors to take a 62% haircut on coupons to stave off ninth default, according to Financial Times.
Investors were asked to accept a suspension on all debt payments for three years. President Alberto Fernández is proposing to pay interest rates of 0.5% from 2023, rising to a maximum of 4.5% and a 5.4% reduction in the face value of the debt, worth around $3.6B.
Argentine economy minister, Martin Guzmán, said that negotiations may last 20 days, since the government hasn’t reached an agreement with bondholders about what is a sustainable debt burden.
According to FT, an international bondholder said that Argentina’s government found “the perfect excuse” (because of the coronavirus pandemic) to make a harsh proposal. Interviewed by FT, Eddy Sternberg, a portfolio manager for emerging markets debt at Loomis Sayles, a Boston-based asset manager, called the proposal “quite drastic”, adding that the prospect of a default has risen as a result.
On the other hand, some analysts suggested that the proposal was designed to pleased Fernández leftist followers. FT recalls that the 20-day negotiation period is set to expire before the deadline for Argentina to make its next foreign debt payment of about $500 million, which is due on April 22 with a 30-day grace period.