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Argentina's big creditors warmly welcomed President Mauricio Macri's plan to delay payment of more than $ 101 billion in debt on Thursday, while agreeing that it should ease some of the country's immediate financial pressures.
On Wednesday night, Buenos Aires announced its intention to defer the payment of $ 7 billion of short-term local debt for up to six months, while continuing the "voluntary deferral" of $ 50 billion. long-term debt, the majority of which is held by foreign investors. The government also announced plans to delay the repayment of $ 44 billion of loans already disbursed by the IMF.
Argentine bonds have fallen to record levels at the latest news. The "once-popular" century bond, maturing in 2117, has dropped nearly 5% to 41 cents per dollar. Short-term dollar debt maturing in 2021 has fallen below 50 cents per dollar, bringing its yield to nearly 60%.
Investors said the decision to require local short-term debt holders to recover their payments at a later date was a positive step, given that the government has some $ 30 billion of debt maturing this year only, according to Capital Economics.
"This is a step forward in trying to resolve an extremely complicated situation," said Shamaila Khan, head of emerging market debt management strategies at AllianceBernstein. "It triggers a process that had to be accomplished."
According to Jan Dehn, head of research at Ashmore, the announcement was "very good news", as the stock of Argentina's net foreign exchange reserves is declining rapidly, to about $ 10 billion.
"This has the effect of significantly reducing their liquidity problem," said Dehn, who has recently contracted a larger portion of the country's debt following recent market turmoil sparked by the surprise victory of Peronist Alberto Fernández in the last legislative elections. "This significantly reduces the risk of default and is extremely positive for bonds."
However, other investors were less optimistic. For Federico Kaune, Head of Fixed Income Emerging Markets at UBS Asset Management, there are still too many unknowns, not least because any deal with foreign investors is likely to be in the hands of Fernández, who has not specified the economic policies that it will pursue. He also gave little indication of the rigor with which he will stick to the austerity program initiated by Mr. Macri and the relations he wishes to maintain with the IMF.
"It must be a comprehensive program and this fragmented approach does not provide us enough information to make a decision," Kaune said. "It's hard to see how they will adjust deadlines and premises," he added, noting that the forced restructuring would likely bring back memories of the early 2000s, when Argentina had defaulted on its own. Debt for more than 100 billion dollars.
Getting an agreement in Parliament for a portion of the local debt will be difficult, said Edwin Gutierrez, head of emerging market sovereign debt at Aberdeen Asset Management. But reaching an agreement with foreign investors could be even more delicate.
"Argentina is not illiquid; he is insolvent, "he said, pointing out that the country's debt was almost 100 percent of GDP and that it was unlikely that it would resorb itself so soon, its record of growth being "dreadful".
As such, Mr. Gutierrez said that foreign investors have little incentive to accept a refund at a later date, especially if conditions are agreed with Mr. Macri, who is unlikely to remain in post after Election proper of October.
"Are you really going to play ball with an outgoing president of the lame duck to face his successor with all the uncertainty around him?" Asked Mr. Gutierrez.
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