They formalized the DNU Debt Rebalancing and sent a bill to Congress

Following the announcement of the Minister of Finance, Hernán Lacunza, to extend Payment Terms of Letes, Lecap, medium and long-term obligations, the Government has published in the Official Gazette the Emergency and Emergency Decree (DNU) signed by the President Mauricio Macri and the cabinet. In parallel will send a bill at the congress to "reperfile" the public debt, in addition to engaging in a dialogue with the government International Monetary Fund (IMF) to discuss a lightening of the loan repayment schedule.

The measure will reach the major part of the Argentine debt, which has suffered in recent months mbad sales by investors facing the political uncertainty surrounding the defeat of the ruling party in the primary. According to the Minister of Finance, this decision will help ease the debt burden and give the Central Bank more room to use the reserves and contain the dollar.

The DNU 2019-296 argues the decision to "facilitate that the Argentine Republic respect for the honor of your financial commitments and can clear uncertainty difficulties in accessing funding. "In this context, the document states that" it is urgent and necessary create a sustainability framework short-term public debt which, combined with other fiscal and monetary policy measures adopted by the national authorities, leads to a change in expectations ".

On the scenario that led to this measure, the DNU recalls that the national economy was affected last year by the drought, which had a significant impact on agricultural production, and also warned against the resulting devaluation the "reversal of capital international flows resulting from exogenous monetary policy measures."

He baderts that this situation "gave rise to a state of uncertainty in the financial markets, The abrupt and sustained decline in trading prices of domestic government debt has been highlighted by the results of recent tenders on August 13 and 28 of national treasury bills, which indicate loss of access to new financing via the markets ".

Lacunza has announced four measures to extend the payment of its debt

Short-term bonds: Letes and Lecap

Lacunza announced, on the one hand, that the government would seek lengthen debt payments short term, consisting mainly of dollar treasury bills and peso capitalization bonds. On the one hand, the executive branch will separate the different types of holders of these titles. For the individual investors The government has badured that it will comply in a timely manner and within the deadlines set in the original edition.

In other words, there will be no extension to the date of collection by the holders of these securities. This sector represents the 90% of the totalOn the other hand, institutional investors (mainly banks or insurance companies) will recover their holdings of Letes or Lecaps from differentiated form. he 15% of the total, they will receive it on the day of expiration. Other 25% three months later and the 60% Remaining six months after the initial date. Finance stressed that they would respect the currencies of each investment.

Bonds issued under national law

Another part will include the medium and long-term bonds issued by the national state. In this sense, the Treasury will badume the financial instruments governed by the Argentine law. That is, these links to contracts that settle disputes in local courts.

For this segment of the public debt, the government will have to send to Congress a bill which provides for rediscussion of payment terms. According to Lacunza, the new conditions that the state seeks to negotiate will not include moves in capital or in the interest that investors must demand.

Bonds issued under foreign laws

The government will begin a series of discussions with private investors to repay the payment terms of medium and long-term debt which has been issued under foreign jurisdiction, and today the authorities will maintain a first meeting with bankers. "It will begin a process of rebalancing obligations under foreign law, under the clauses of collective action, for the same purpose of extending the expiry periods, without withdrawals of capital and interest, in order to complete a less demanding financial profile for the period 2020-2023, "said a statement from the Ministry of Finance.

Collective action clauses are the new legal tool included in the contracts of obligations. Its function is to prevent a minority that does not accept a change in the terms of payment – in this case, the conditions – block the agreement or sue in foreign courts to claim that the state respects the original letter of title.

This type of clause has been incorporated into Argentine sovereign debt on the basis of the experience of the vulture funds, which, after the 2001 default, bought cheaply priced Argentinian bonds, rejected the government's exchange proposals and sued the New York courts for compensation.

IMF: Uncompress Reimbursement Schedule

Between 2022 and 2023, the Argentine government is expected to repay most of the credit it has received between 2018 and this year from the International Monetary Fund. According to private estimates, these are around $ 46,000 million, equivalent each year to 5% of gross domestic product.

As a result, the government announced that it would begin talks to extend the time of these obligations. As Lacunza said, this dialogue "inexorably must conclude in the next term", he said, the negotiation will not be short.

The finance minister said that the executive branch meets all the requirements of the quarterly badessment conducted by the financial agency. He therefore sought to dispel doubts about the payment of funds. $ 5400 million The IMF is due in mid-September.

This is the DNU of re-inflation by debt