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Argentina agrees to $4.65 billion payoff to settle longstanding debt row

© Juan Mabromata, AFP | Argentinian Finance Minister Alfonso Prat-Gay at a press conference in Buenos Aires on February 29, 2016

Text by FRANCE 24

Latest update : 2016-03-01

Argentina has agreed to a $4.65 billion cash payment to its main holdout creditors and will present the deal to Congress this week for a vote which would end 14 years of bitter legal battles.

The deal, contingent on congressional approval and a payment set for April 14, paves the way for Argentina’s return to global credit markets, and comes amid a thaw in relations with the International Monetary Fund (IMF).

Finance Minister Alfonso Prat-Gay said he hoped to issue two or three new sovereign bonds on international markets for a total of up to $15 billion in April if lawmakers were swift in backing the accord.

The bonds would finance the payout to all holdout creditors who had reached an agreement, he said.

“This is a giant step forward in this long-running litigation, but not the final step,” mediator Daniel Pollack said.

The agreement will see the four largest remaining holdout creditors get paid 75 percent of the amount outstanding on their judgments, including principal and interest, Pollack said.

Hedge fund Elliott Management, run by billionaire Paul Singer, brought numerous lawsuits against Argentina.

The legal saga involved years of court battles, street protests in Buenos Aires, the seizure of an Argentine naval vessel.

The predecessors of recently-elected Argentinian President Mauricio Macri fought to avoid settling with the holdout creditors, who in turn blocked them raising capital on the international markets.

In a statement, Elliott said it was “pleased” to have reached an agreement that awarded it slightly better terms than the 72.5 percent accepted by some other investors earlier this month.

April 14 deadline

Argentina fell back into default in July 2014 after former leftist leader, Cristina Fernandez, refused to negotiate better terms than those offered in bond swaps that followed Argentina’s then-record 2002 default on $100 billion.

Underlining the bitterness of the dispute, Fernandez blasted US District Judge Thomas Griesa who oversees the cases as “senile” and branded the hedge funds “vultures.” Macri, a pro-markets advocate, made resolving the battle a priority after taking office in December.

January saw the beginning of weeks of marathon negotiations between creditors, Finance Secretary Luis Caputo and Pollack.

Prat-Gay said Argentina was taking the key step to curing its default and that Argentina was already in talks with banks over a new debt sale on global markets.

“We hope that if Congress reaches a decision quickly ... we will probably be able to go to the market in April,” Prat-Gay told a news conference.

If the payment is not made by April 14, 2016, then the agreement could become null and void if the two sides do not agree an extension.

The holdouts rejected two prior debt restructurings in 2005 and 2010 that paid out roughly 30 cents on the dollar. The investors who accepted those deals have not been paid interest since July 2014 after the judge Griesa barred further debt payments until a deal was reached with the holdouts.

Healing rift with IMF

A final settlement would open financing options to Macri as he tries to improve the country’s fiscal problems without imposing unpopular spending cuts. He was elected in November promising free-market policies following eight years of protectionism under Fernandez.

Meanwhile, the IMF and Argentina took a step towards repairing a rift that saw the country become the first member censured by the IMF.

The IMF on Monday released several of its recent assessments of the Argentine economy that were held back due to the rift, and said Buenos Aires had informed it of plans to allow a formal IMF review this year.

It also comes three years after the IMF officially censured Argentina for not living up to its obligations to the fund, particularly in providing accurate data on economic growth and inflation.

(FRANCE 24 with AFP, REUTERS) 

Date created : 2016-03-01

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