Sovereign Debt Restructuring

SOVEREIGN DEBT RESTRUCTURING

Argentina unilaterally postponed payments on local bonds

On April 5, 2020, President Fernández signed Urgency and Necessity Decree (DNU) No. 346/2020 (the “Decree”) which postponed payment of interest and principal of local-law, U.S. Dollars denominated bonds until December 31, 2020 or such earlier date as may be determined by the Ministry of Economy taking into account the advances on the debt restructuring process.

The mandatory deferment does not reach non-endorsable treasury bills (Letras) held by the Argentine Central Bank (BCRA) and FGS/ANSES, nor Letras issued under Decree No. 668/19 or certain other joint resolutions of the Finance and Treasury Secretaries stated in the Decree.

Deferred bonds will be replaced with new bonds to be issued at the original bonds stated maturity, which conditions will be determined by the Finance and Treasury Secretaries of the Ministry of Economy.

The Decree also extends the effects of DNU No. 668/19 until December 31, 2020, which mandates governmental agencies, public entities and public trusts to invest their surplus in redeemable short-term Letras issued by the Federal Government. In addition, it temporarily suspends –up to such date– the exemption by FGS/ANSES to comply with said investment obligation.

Finally, the Decree authorizes the Ministry of Economy to carry out liability management, exchange and/or debt restructuring transactions regarding the deferred bonds with the goal of recovering and assuring the sustainability of the public debt, which must be compatible with the recovery of the productive economy and the improvement of the key social indicators, as stated in the Social Solidarity and Productive Reactivation within the Emergency Framework Law N° 27,541 (to see our Legal Update, click here).

The Decree moves in line with the provisions of prior Decree No. 49/19, which had deferred the payment of principal under “Letras del Tesoro en Dólares Estadounidenses” until August 31, 2020, and Decree No. 141/20, which had deferred the payment of principal corresponding to the “Dual Bond” until September 30, 2020 and had suspended interest accrual thereof. Under these prior debt postponements, the Federal Government had kept paying interest under deferred debt.

It is yet unknown the Government’s approach with respect to forthcoming interest payment under foreign-law bonds, and whether a payment suspension might jeopardize the Government’s goal to achieve a quick and orderly debt restructuring process.

To access the Spanish version of the Decree, please click here.

Should you need any further information, please do not hesitate to contact Tomás M Araya, Fermín Caride or Lucía Carro.