Argentina has reached an in-principle agreement with US based creditors to settle the long running litigation that may allow Argentina to return to international capital markets.
YieldReport readers will recall how Argentina defaulted on government bonds in 2002 and the debt was subsequently bought by a range of US ‘vulture funds’ that typically buy debt for a few cents in the dollar in the hope they can get a significant amount of the face value of bonds bought back. The funds bought the Argentine government debt and immediately began pursuing them for a full repayment.
The government had previously done deals for other debt holders, many of whom are Argentine citizens, but the funds used the US courts to strike those deals out, arguing that all debt holders must be treated equally. To simplify was has become an increasingly complex deal a recent an offer to pay 75% of face value on the bonds was accepted by the four largest “holdout funds”, as they became known. The “holdout funds” had agitated for a higher amount and some are not parties to this latest arrangement, which leaves the 2014 injunction in place where no one receives principal or interest payments until all creditors are paid at the same time.
The Argentine government for its part, is keen to re-enter the international capital markets to source new debt and invest in its economy.
The new agreement has a number of hoops to go through before being fully settled but the signs are encouraging. Interested readers can view our previous story to get a fuller picture of the saga.