Argentina's debt restructuring has met market expectations after President Nestor Kirchner announced yesterday that creditors holding 76% of the defaulted debt participated in the exchange.
Initially some analysts said Argentina would be lucky to get a 60% participation rate. But in recent weeks, commentators in the financial community began to revise their opinion upwards as many creditors realized they had little option but to accept the terms of Argentina's 'take-it-or-leave-it' offer, which closed last Friday.
"No one ever imagined that the Argentine restructuring would work," says Walter Molano, managing partner at BCP Securities. "Yet the Argentines managed to arrive at a workable solution."
Although no official benchmark was ever set, experts say that the high participation rate will now allow the Latin nation to resume its talks with the IMF. Economy minister Roberto Lavagna is expected to fly to Washington at the weekend to meet Fund managing director Rodrigo Rato. Argentina's programme was suspended after disagreements over structural reform and the debt restructuring.
Despite its success, the debt restructuring has left a bitter taste in the mouths of many creditors. The recovery rate of 34 cents on the dollar in net present value terms is considerably lower than comparable debt restructurings. In addition, investors still feel a great sense of injustice over the manner in which the Argentine government conducted itself during the restructuring process.
The hope now is that the government can continue with the job of reviving Argentina's fortunes. Lavagna said the exchange had saved the country $67 billion. As a result, the Latin nation needs only $3 billion to service its debt this year compared to $10 billion in 2001, the year the country defaulted.
Interest payments would now stand at 15% of the country's foreign reserves compared with 70% three years ago.