Argentina’s restructuring of nearly $100 billion of defaulted debt suffered a big setback after the economy ministry announced that it was delaying the deal until January 17.
The restructuring was supposed to take place next Monday but after being hit by a series of bad news, the Argentines took the decision to postpone. The move will be a big blow to President Kirchner, whose reputation is at stake over the success of the deal.
For weeks Kirchner and his colleagues had been confident that the deal would go ahead as planned, with a high participation rate. But events over the past few days have shown the government’s confidence to be misplaced.
First, the Bank of New York, the exchange agent in the debt restructuring, said that there were too many changes to the proposal, and it would not have the mechanisms in place by the November 29 deadline. Then many bond clearing houses said they would not be ready in time.
The biggest blow though came when the Italian government said it would need until the end of December to approve the exchange. Italian consent is vital to Argentina as it is home to about 450,000 retail holders of Argentine defaulted debt.
While most bondholders welcome the extra time to think through their strategies, the delay is very bad news for Argentina. “The Argentine government was hoping to get the debt exchange out of the way before the end of the year, when it was supposed to resume negotiations with the IMF,” says Walter Molano, partner at BCP Securities.
“The Argentine government was able to delay the IMF negotiations until January, but the recent delays complicate things.”
There are still serious doubts as to how many bondholders will enter the exchange. Most creditors are still furious with the offer, which they claim represents 30 cents on the dollar. “I’ve not heard anyone say it’s a great deal; not even any local investor,” says one foreign bondholder.