Argentina

The Province of Mendoza has become the first Argentine province to complete a restructuring of its international bonds this year after a proposal, amended twice, achieved enough backing to trigger the collective action clause (CAC).

The Province of Mendoza has become the first Argentine province to complete a restructuring of its international bonds this year after a proposal, amended twice, achieved enough backing to trigger the collective action clause (CAC).

Argentina’s recently restructured international bond curve looks further than ever from the 10% yield target that the finance minister had set. New currency controls aimed at halting the decline in international reserves have had a catastrophic impact on both corporate and sovereign bond markets, and are likely to spell major trouble in the long term, analysts say.

Argentine corporate bonds sold off sharply on Wednesday after the central bank sought to dictate how the issuers could refinance their dollar debt as part of an escalation of currency controls.

The Argentine province of Córdoba’s bondholders have said that the issuer is asking for more debt relief than it needs with a proposal to push out maturities and reduce coupons on three bonds maturing in 2021, 2024 and 2027. The group has submitted a counterproposal that would simply extend the maturity on the 2021s without reducing the coupon, and leave the other two bonds untouched.

At least 12 Argentine provinces are either deep in restructuring talks with bondholders or are preparing to begin negotiations. But as Argentina’s finance minister Martín Guzmán calls for regional governments to renegotiate their debts in line with the federal government’s sustainability guidelines, investors are unlikely to grant the same level of debt relief they agreed with the sovereign.

The world’s largest independent McDonald’s franchisee, Arcos Dorados, is planning to tap its senior unsecured bonds due 2027 as it looks to refinance debt raised to tackle the Covid-19 crisis.

Banco Hipotecario, the Argentine bank focussed on mortgage and consumer loans, is asking holders of a dollar bond maturing in less than three months to swap their paper for a new 2025 bond and cash. If bondholders do not accept the terms, default is likely, says Moody’s.

At least 12 Argentine provinces are either deep in restructuring talks with bondholders or are preparing to begin negotiations. But as Argentina’s finance minister Martín Guzmán calls for regional governments to renegotiate their debts in line with the federal government’s sustainability guidelines, investors are unlikely to grant the same level of debt relief they agreed with the sovereign.

Argentina’s foreign law exchange bonds will go free to trade this week and offer early clues as to how markets are likely to value the newly restructured credit, after some promising but inconsistent signs emerged from grey market trading last week.

Martín Guzmán, Argentina’s finance minister, said on Monday that 93.5% of international bondholders had participated in the sovereign’s debt restructuring as he promised to deliver a budget by the middle of the month.

Bond investors said Argentina’s formal approach to the International Monetary Fund this week was a positive, if expected, development, but that it was still very uncertain whether the government would keep to a moderate path.