IMF-induced “voluntary” debt restructuring?

ARGENTINA - In Brief 29 Aug 2019 by Esteban Fernández Medrano

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Economic Minister Hernan Lacunza announced yesterday, after the market closed, that the executive is going to implement active debt management to voluntarily extend the maturity of short-termed and medium-termed public debt, allegedly without a hair cut on capital or interest.Below we summarize the main points of Hernan Lacunza´s announcements. “Argentina does not have a debt solvency problem, but a medium-term liquidity problem, which generates the current financial instability and cuts off its access to voluntary financing of the market. We will therefore implement four initiatives aimed at easing the financial burden in the short and medium term.Measures:1) Extend the maturities of the short-term treasury debt (LETES and LECAPS) held by institutional investors (traditionally banks and insurance companies representing 10% of the investors base) between 3 to 6 months. Individual investors (representing the remaining 90% of the investors’ base) will collect their credits as originally provided in the title.2) To clear the financial requirements of 2020-2023, the executive will submit to Congress a bill that provides (the executive) the tools necessary to promote a voluntary extension of the terms of the debt under local jurisdiction, without a hair cut on capital or interest. But Congress will be sovereign in defining the terms of that extension.3) Start a process of extending the terms of the bonds under foreign legislation using the 'collective action' clauses, in order to extend the maturity periods without capital or interest withdrawals, and in order to achieve a less demanding debt profile for the period 2020–2023. To this end tomorrow (for today) we will invite ...