Buenos Aires / Bloomberg
Argentina’s deal to put a bitter 15-year creditor saga behind it won’t come cheap.
The country agreed to terms with bondholders led by hedge fund billionaire Paul Singer over unpaid debts from its record $95 billion default in 2001.
The settlement, which will let Argentina regain access to overseas bond markets, is the biggest, and arguably the most significant, in a string of creditor accords struck by President Mauricio Macri since he took office Dec. 10. The tab for all these deals? As much as $15 billion — which will be all raised from two or three bond sales in April, Finance Minister Alfonso Prat-Gay said.
While Argentina’s notes have been in high demand on optimism Macri will restore confidence and get the economy moving again, the government will need to borrow money just at a time when there’s little appetite for risky emerging-market debt. In the face of tepid global growth, Argentina may have to pay a half-percentage point above its prevailing borrowing costs to entice bond buyers, according to Seaport Global Holdings LLC strategist Michael Roche.
“Now comes the interesting part,” said Kevin Daly, a London-based money manager at Aberdeen Asset Management, which oversees about $11 billion of emerging-market debt.
The deal calls for Argentina to pay $4.65 billion in cash to Singer’s Elliott Management and fellow hedge funds Aurelius Capital Management, Davidson Kempner and Bracebridge Capital. The amount is equal to 75 percent of almost $5.9 billion in claims on unpaid principal and interest, plus $235 million in other claims and some of the holdouts’ legal fees, the mediator, Daniel Pollack, told reporters Monday in New York. The agreement has an April 14 deadline that could be extended if necessary, Prat-Gay said.
Terms of the agreement are better than the previous offer of 72.5 percent of creditors’ claims and mark a significant improvement from earlier restructurings that imposed losses of about 70 percent on debt holders. About 7 percent of creditors, including Elliott, rejected those initial terms — which were offered in 2005 and then again in 2010 — and pursued repayment in court.