Deadline for Argentine debt restructure plan likely to be extended
After missing interest payments to its international creditors on Friday, Argentina’s government has set today as a deadline to submit a plan to restructure its foreign debt.
Negotiations over the fate of Argentina’s $65 billion in foreign debt are ongoing. Three separate creditor groups rejected an initial proposal put forward by the government in April, and after the expiration of a May 22 deadline on previously missed payments, the country defaulted on its sovereign debt for the ninth time in its history.
The COVID-19 pandemic has only worsened the consequences of not reaching a deal. Virus-related shutdowns have had a severely negative effect on the Argentinian economy, which is suffering from 46% inflation, a rapid devaluation of its currency and an extended recession. Bondholders who do not get paid could take legal action against Buenos Aires and, if 25% of them agree, the entire debt—not only the interest payments—could be declared in default.
Fortunately for Buenos Aires, in the not improbable case that an acceptable plan is not submitted today, the deadline will likely be extended; the long-term concerns over a full default, a deeper recession and an exasperated currency crisis will likely be outweighed by the short-term need for a restructuring plan by today’s deadline.
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