February 11, 2020 / 6:03 PM / 6 days ago

Argentina to delay $1.47 billion bond payment amid debt crisis

BUENOS AIRES (Reuters) - Argentina has decided to postpone a $1.47 billion principal payment on the country’s AF20 bond until Sept. 30, the economy ministry said on Tuesday, potentially complicating a wider debt restructuring program.

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

The payment had been due on Thursday. The government, in a statement, said it planned to continue making scheduled interest payments on the bond. But investors may still frown on Argentina changing payment terms without consulting the bondholders.

“It is a unilateral decision by the debtor, and not a move that creates goodwill in the market,” said Goldman Sachs emerging markets analyst Alberto Ramos.

Argentine over-the-counter bonds fell an average 1% on Tuesday while country’s risk spread widened 100 basis points to 1,982 over safe-haven U.S. Treasuries, according to JP Morgan’s Emerging Markets Bond Index Plus.

The peso-denominated AF20 is linked to Argentina’s foreign exchange rate, and was issued under Argentine law.

It was originally issued for an amount equivalent to $1.64 billion. On Feb. 4 the government swapped $164 million of the bond for three instruments due in 2021.

“The amortization will be postponed until Sept. 30 in order to allow more time for the bond to be restructured in a way that is consistent with the restructuring of the rest of our external debt,” Tuesday’s economy ministry statement said.

The announcement came less than 24 hours after a failed bond sale by Argentina that augured poorly for its plan for revamping a total of about $100 billion in debt. As it stands, the government has said its debt load is unsustainable and vowed not to continue paying on current terms.

Tuesday’s announcement also came on the eve of talks with Argentina’s biggest creditor, the International Monetary Fund, over the government’s strategy for getting out of recession. That strategy starts with re-negotiating IMF loans and sovereign bonds.

President Alberto Fernandez hopes to convince the fund to rejig $44 billion in suspended loans under a program that would avoid the kind of fiscal austerity and structural reforms the IMF typically imposes to restore nations’ finances.

“Argentina is going through the initial iterations of a likely complex debt restructuring but the authorities have yet to articulate a well fleshed out macro policy plan,” Ramos said. “It is also unclear what their strategy for fiscal policy and public debt are. Time will tell, but time is running out.”

The discussions between IMF and Argentine officials are scheduled for Wednesday through Friday in Buenos Aires.

Reporting by Eliana Raszewski; Writing by Hugh Bronstein; Editing by Richard Chang, Lisa Shumaker and Tom Brown

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