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Argentina postpones debt restructuring deadline

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Via Financial Times

Argentina’s debt restructuring talks with creditors will continue for at least two more weeks after the centre-left government failed to meet its deadline of March 31 to cut a deal.

The deadline had been considered to be ambitious by investors and economy minister Martin Guzmán admitted on Tuesday that the outbreak of the coronavirus pandemic, which has now claimed 27 lives in Argentina, had further delayed progress in negotiations.

“We are trying to fix the debt crisis in an orderly way,” the 37-year-old economist told reporters, clarifying that no decisions had been made on the contentious issue of whether to impose a “haircut” on the $83bn of foreign debt that he says is eligible for restructuring.

Mr Guzmán, an academic who previously worked with Nobel laureate Joseph Stiglitz at Columbia University, said that “multiple combinations” were still being considered for the debt offer, including lower interest rates, longer maturities and a grace period without payment. He did not set a new deadline for making an offer.

A deal with private creditors will be necessary before Argentina can start a new programme with the IMF, which has lent the country $44bn since it came to its rescue in the thick of a currency crisis in 2018.

“The objective of this administration is to have a new programme with the IMF” in order to make the existing repayment schedule less burdensome, he said, explaining that the Fund’s Article IV consultations — the first step towards a new programme — have been held back by the impact of the spread of the coronavirus.

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Argentina’s bond prices have collapsed this year as the government has hardened its attitude towards creditors — a stance that has received backing from the IMF, which last month called for private creditors to accept a “meaningful” reduction in the value of their investments.

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The coronavirus crisis has pushed Argentine bond prices lower. Many are now trading at below 30 cents on the dollar, fuelling concern distressed funds may be buying up the country’s debt in order to seek repayment in full. That could lead to a repeat of the decade-long legal battle with creditors during its last major default in 2001.

After the outbreak of the coronavirus crisis, officials have threatened they would stop making payments, but the government made a $248m bond payment on Tuesday to show good faith and facilitate negotiations with creditors.

Javier Alvarado, a local economist, pointed out that there were no major maturities for debt governed by foreign law this year, with less than $2bn in payments due by August. “For Argentina to default over a $500m payment would be ridiculous . . . I don’t think the president would be willing to assume that cost,” he said.

But he is worried that Mr Guzmán appears set on demanding a freeze on bond payments for the duration of Alberto Fernández’s four-year presidency. “If that is so, it’s not going to go well for him.”

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