Creditors unlikely to accept Argentine loan restructuring deal

Today is the deadline for Argentina’s creditors to accept the government’s plan to restructure $68 billion in loans.

In mid-April, Economy Minister Martin Guzman proposed a restructuring plan that would halt payments for three years and reduce interest payments on loans by 62%. Many major investor groups have rejected the proposed plan, arguing Argentina’s projected economic recovery from COVID-19 makes such drastic payment cuts unnecessary.

A failure to restructure would most likely lead to a formal default on loans, limiting for years to follow Buenos Aires’ access to global capital markets and, in turn, its ability to recover from a harsh recession made worse by the COVID-19 pandemic.

Guzman has expressed interest in working with bondholders after the deadline today should no agreement be reached, but time is short as the grace period for payments ends May 22. Any deal is expected by bondholders to address liquidity issues through short-term relief, possibly by deferring near-term maturities before returning to original interest payments in the medium term. However, an accord is unlikely to be reached today as investors are unwilling to accept major cuts and Buenos Aires remains adamant about its inability to grant further concessions.

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