Argentina approves deal to end debt standoff with creditors

The Argentine Congress in Buenos Aires © Marcos Brindicci
The Argentinian Senate has approved a repayment deal which should put an end to the country’s 15-year long court battle with holdout creditors.

The terms of the deal, which has been approved by the lower house of Congress, is that Argentina has until April 14 to pay $4.65 billion to US hedge funds.

The deal allows the country’s President Mauricio Macri to issue $12 billion in bonds and use part of that to pay off bondholders who refused to participate in the country’s debt restructuring. This will be the first time Argentina has been able to tap global credit markets since 2001.

Last month, Buenos Aires reached a settlement with several bondholders for $250 million and €185 million.

In 2005 and 2010 Argentina suggested its debt holders swap bonds at a steep discount of up to 70 percent off their par value. The move was hoped to ease the country’s financial crisis following its 2001 default on $100 billion in bonds. While 93 percent of bondholders agreed on lesser-valued bonds, others, including some US hedge funds, refused to participate and went to court.

The Senate’s approval has been criticized by some in the country, with groups protesting during the debates.

“The country is in default now. It’s like a company that is bankrupt,” Roberto Basualdo, a Peronist senator from the northwestern province of San Juan, told the Wall Street Journal. “We need to work together, across party lines, to accomplish long-term goals.”

Unlike President Macri who has made settling the dispute with bondholders a top priority for the country, the previous government of President Cristina Fernandez de Kirchner refused to negotiate with the holdouts. Kirchner called them "vulture funds".

Argentina is facing huge economic problems. The country has 30 percent annual inflation and a debt of about $20 billion. It desperately needs international financing to close its wide fiscal deficits, improve infrastructure and start rebuilding investor confidence.