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Argentina Appeals To Extend Terms Of Private And IMF Debt

Argentina Appeals To Extend Terms Of Private And IMF Debt
Amidst an increased business confidence over financial health of the country fueled by enhanced political tensions before the general elections in October, Argentina is planning to seek an extension of the terms for the private debt and the debt from the International Monetary Fund (IMF), the government of President Mauricio Macri said on Wednesday.
Following days of frantic falls of Argentine assets, the plan of the Argentine government includes extension of the maturity date of short-term debt, of bonds owed by local legislation, under foreign law and for the repayment of a loan of 57,000 million dollars from the IMF. This plans was presented by Minister Hernán Lacunza.
Lacunza said that the aim of the plan is that the next government, set to take office in December, “can deploy its policies without restricting imminent or too high debt maturities. There would be no cuts in the capital or interests of investors, stressed Lacunza.
The impact of the plans of the Argentine government to extend the due dates of its debt with the IUMF is being analyzed, said the international financial body after the announcement by the Argentine government.
Following a wide defeat in the primary elections this month of Merci, who is preferred as the leader of the country by the markets, there was a collapse in the Argentine peso, bonds and stocks. The loss has now left Merci with very little chance of getting re-elected.
Investors are concerned that the interventionist policy led by his vice candidate, former president Cristina Fernández de Kirchner, when he ruled, would be reinstated by the opposition candidate, Peronist Alberto Fernández, who is poised to win the October elections following the primaries.
A project for long-term securities under local legislation would be sent to the Congress by the government of Argentina now so that the terms of debt maturities can be modified. The government would invite banks to submit their proposals with respect to the bonds under foreign legislation, Lacunza said.
A wipe out of almost 10 billion dollars from its international reserves has been inflicted on the Central Bank (BCRA) in recent weeks. The money was planned to have been used for paying investors who had stopped refinancing short-term bonds as well as catering to a growing demand for US dollars in the face of the current uncertainty.
There is a certain degree of skepticism among a section of operators and analysts about the reaction of the investors with respect to the effort s to seek extension of the terms of the obligations.
"The markets are going to see it as a default," Hernán Esteves, an economist at FyEConsult in Buenos Aires, told the media. “It is a debt restructuring proposal launched by the (current) government to execute the next government. It lacks all credibility in the midst of a political transition that makes it very difficult to handle this restructuring in an orderly manner, ”he said.
However decision of the Argentine government to seek extension now rather than later was a positive move according to Roger Horn, executive director and emerging market strategist at SMBC Nikko Securities America in New York. "I don't like to use the word default, I prefer to think that it is a recognition of reality," Horn said. “With bonds trading at 40 (percent of nominal value), the market was already waiting for the worst scenario. It is better to deal with this now and not in six months. ”

Christopher J. Mitchell

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