Argentina offers $6.5 bn cash payment to creditors suing over defaulted bonds

06 Feb 2016


Argentina yesterday offered $6.5-billion cash payment to creditors who are suing the country over defaulted bonds.  With the move, the government seeks to end a festering 14-year legal battle that led the country to be shunned by investors.

Two out of six leading bondholders had already accepted the offer according to the US court-appointed mediator, which hailed the proposal by Argentina's new, business-friendly government as a "historic breakthrough".

If all litigating bondholders were to accept the offer, it would amount to a roughly 25 per cent discount or so-called haircut for creditors who filed claims of about $9 billion.

The legal fight over Argentina's record default of around $100 billion in 2002 took a turn after less than two months after president Mauricio Macri assumed office and expressed his commitment to a deal.

If Macri were to clinch an agreement, the cash-strapped country would be able to emerge from default and return to global capital markets to finance urgently-needed infrastructure including  new roads and railways.

Lower borrowing costs would also greatly benefit corporate and regional finances in Latin America's third largest economy.

According to Argentine finance ministry, the offer entailed a ''payment of approximately $6.5 billion if all the bondholders accept it".

However, there was no deal with billionaire Paul Singer's Elliott Management, which had led the group of creditors litigating against Argentina, according to statements released by the court-appointed mediator and the government yesterday. The offer was accepted by Montreux Partners LP and Dart Management Inc, which would settle demands for $9 billion at an average 75 cents on the dollar, depending on the nature of the investor's claim.

According to commentators, the agreements represented a partial victory for newly installed Macri. Talks between the government and representatives of the creditors took place over the past five days at the office of mediator Daniel Pollack in New York.

''This is the beginning of the end,'' Bloomberg quoted Mauro Roca, an economist at Goldman Sachs Group Inc in New York. ''This chapter will be closed this year.''

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