Explainer: Argentina's race to solve $323 billion debt conundrum

BUENOS AIRES (Reuters) - Argentina is racing to avoid a messy ninth sovereign default as it firefights recession, stubborn inflation and increasingly wary investors, who have pushed the South American grain giant’s bonds into distressed territory since last year.

FILE PHOTO: Argentine one hundred peso bills are displayed in this picture illustration taken September 3, 2019. REUTERS/Agustin Marcarian/Illustration/File Photo

The country, which had a total $323 billion debt pile at the end of 2019, needs to pay interest on three bonds on Friday, the same day as an increasingly fragile-looking deadline to strike a $65 billion restructuring deal with holders of its foreign debt.

Argentina’s center-left government made an initial proposal to bondholders in April, which was rejected by major creditor groups who have now made counter proposals. The two sides remains “meters apart,” though are edging closer.

The country’s economy minister, Martin Guzman, said on Tuesday he expected the Friday deadline for a restructuring deal to be pushed back with work still to be done to close the gap between the government and its creditors.

(Graphic: Argentina debt pile - )


Argentina’s initial proposal included a three-year halt on payments, a 62% coupon cut, equivalent to a $37.9 billion reduction, and a 5.4% reduction of principal, amounting around $3.6 billion. It also pushed maturities to 2030 and beyond.

An initial deadline on May 8 passed and was extended to May 22.

The Exchange Bondholder Group, which holds around $4 billion of bonds, has proposed a short payment halt until November with coupons ramping up each year, a zero principal haircut and a mechanism to increase payouts tied to GDP.

The Argentina Creditor Committee, Fintech and Gramercy proposed a bond maturing in 2040 with coupons on dollar bonds starting at 1.25% in November 2020, rising to 5.875% by the end of 2025. Amortization payments would start in 2027.

The Ad Hoc Bondholder Group including BlackRock, Fidelity and others, proposed new bonds maturing from 2027 onward with generally no haircut, and cash coupon payments from 2021, a proposal obtained by Argentine publication Infobae showed.

That group’s law firm White & Case did not respond to a request for comment on the proposal.

(Graphic: Debt revamp - )


Argentina’s debt pile includes $130 billion of debt with the public sector, while around half of the total is split between foreign currency debt with the private sector and global organizations such as the International Monetary Fund.

Argentina owes the Paris Club creditor group $2.1 billion under a deadline that expired earlier in May. It has asked the informal group of lenders for a one-year extension on the payment.

The South American country is also negotiating with the IMF to strike a new agreement to replace a landmark $57 billion financing deal struck in 2018. Argentina has already received around $44 billion under that deal.

(Graphic: Argentina economic road map - )

Reporting by Adam Jourdan; Additional reporting by Rodrigo Campos in New York and Karin Strohecker in London; Editing by Steve Orlofsky