Debt swap: government seeks to defer payments to 2024 and 2025

The government wants to defer between AR$9.2 and AR$9.5 trillion

The Economy Ministry launched a voluntary debt swap that aims to defer debt maturing between June and September to 2024 and 2025.

According to official calculations, the total amount is AR$9.2 trillion (US$37 billion at the official exchange rate, US$20 billion at the MEP rate). Private consulting firms estimate it to be around AR$9.5 trillion, of which at least 70% is held by the public sector.

There are seven financial instruments eligible for the exchange – two inflation-adjusted instruments, two dual bonds which pay whichever is higher between the inflation rate and the peso depreciation against the US dollar, one US dollar-linked bond, one LEDE, and one BONCER.

There are four new instruments – a BONCER that matures in December 2024 and three new dual bonds that mature in August 2024, November 2024 and January 2025.

The goals, according to an official press release, are the “continued ordering of the maturity profile in pesos and to obtain financial relief for the Treasury.”

What to expect

Talks about a debt swap have been ongoing at least since last week, when Finance Secretary Eduardo Setti and Financing Undersecretary Leandro Toriano met with representatives of banks. Sources in the Economy Ministry said that executives from Santander, Galicia, Macro, ICBC, and BBVA banks attended the meeting.

The tender will start on June 8 at 10:00 a.m. and offers will be received until 3:00 p.m. The prices of the instruments will be determined during the bidding process.

Consulting firms calculate that between 56-60% of the total belongs to the Central Bank and the Guarantee and Sustainability Fund – a sovereign investment fund that partly finances ANSES, Argentina’s social security administration, which handles pensions. Consulting firm Empiria calculates that some 15% of the amount is in the hands of state-owned banks.

Of the 25-30% held by the private sector, a report calculates that 8% is in the hands of mutual funds and 7% in private banks.

Considering the percentage of the state-owned instruments, the acceptance rate is forecast to be 70-75% of the total offered.

Regarding private acceptance, government sources told the Herald that negotiations with banks are looking “good,” confirmed mutual funds are “virtually null,” and “very few” insurance companies are pledging to accept the swap.

“Such long maturities are not attractive,” Pablo Repetto, Head of Research at the Aurum broker, told the Herald.

“The instruments they offer all mature in 2024, after the change of government, and it is not clear what [economic] model will be in force at that time, nor are the implications of a change in the peso asset regime the government has been sustaining to control the exchange rate with a very high gap.”

“Consequently, the risk of a revision of such indebtedness is high, and it does not seem very interesting for the private sector to assume such an extension of terms.”


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