Argentina in default but creditor negotiations continue

Argentina defaulted on Friday for the second time in less than 20 years after failing to pay $500 million of interest on its bond debt, but it continues to negotiate a restructure with creditors, Finance Minister Martin Guzman said.

"There is still a significant distance to go but, more importantly, all sides remain at the table to find a solution," he said.

The default -- Argentina's ninth overall -- was widely expected after the economic ministry announced on Thursday that it was extending, for a second time, talks with international creditors on restructuring $66 billion of its debt. The new deadline is June 2.

President Alberto Fernandez's government is expecting to come to an agreement before Argentina suffers the full effects of its default.

Thursday's announcement of the extension "provides flexibility in case the Republic decides to make modifications in the coming days to ensure a sustainable agreement with our creditors," Guzman said.

The crisis-wracked South American country, which has been in recession for two years, currently owes $324 billion, amounting to around 90 percent of its GDP.


The crisis was aggravated when its economy was hit -- like others all over the world -- by the coronavirus pandemic.

Though it is one of the world leaders in food exports, Argentina has already defaulted eight times in its history, most recently in 2001 when it owed $100 billion.

That triggered a painful social and economic crisis.

- 'Significant losses' -

Ratings agency Moody's said the default would provoke "significant losses for investors."

"Moody's expects that the panorama for the restructure of Argentina's debt will very probably become more complicated," said vice president Gabriel Torres.

Argentina's main group of creditors is demanding "a direct and immediate discussion" on its restructure plans.

"The group is happy to see that Argentina has expressed its intention to work with the creditors, but actions speak louder than words," said the Ad Hoc group made up of investment funds including BlackRock and Fidelity.

"Over the last month, Argentina has communicated virtually nothing of substance to its creditors."

The Merval index on the Buenos Aires Stock Exchange was down 1.03 percent at the close on Friday to 40,962.76 points. Stocks had risen 3.99 percent throughout the week as negotiations between the governor and creditors continued.

Guzman has taken an aggressive stance on debt, in part driven by a need to free up resources to fight the novel coronavirus pandemic.

Argentina asked bondholders for a three-year grace period on debt repayment, a 62 percent reduction on interest amounting to $37.9 billion, and 5.4 percent on capital -- or $3.6 billion.

That was rejected with a counter offer that the government says it is studying.

"If the majority agrees to the exchange, the default will be very short. I don't think there will be a reduction in the letters of credit" that would impede essential imports, economist Marina Dal Poggetto from EcoGo told AFP.

"But if negotiations take a long time, we'll pay dearly."

The International Monetary Fund, which is supporting Argentina in its restructuring plan, says it has been encouraged by the "willingness of both sides to continue discussions to reach a deal," spokesman Gerry Rice said.

But analysts Capital Economics said "there is a growing risk that the restructuring talks drag on into next year."

- 'Waterfall of bad news' -

Yet more bond interest payments are due at the end of June, which could be delayed by a month.

If by then there is no restructuring agreement, "bondholders will probably consider it more convenient to litigate given they think it unlikely that Argentina will be able to reach a short-term agreement," Ignacio Labaqui of Medley Global Advisors told AFP.

If bondholders take Argentina to court in the United States, it would be "a waterfall of bad news for the country," said Sebastian Maril, from the Fin.Guru consultancy.

Now that Argentina has defaulted, it also runs the risk of its debt being bought at a cut-price deal by speculative funds that could then choose to pursue much bigger rewards through litigation.

Such funds, known as "vultures" in Argentina, did so successfully in New York courts in 2014.

Agence France-Presse

How to Restructure Credit Card Debt

For consumers struggling to make ends meet and racking up credit card debt and barely making minimum payments, hardship programs might provide a welcome relief.

Many credit card companies offer these programs that target borrowers who have fallen behind on payments. They typically offer debtors lower interest rates as well as reduced payments, fees and penalties. In general, most hardship programs fall into two categories: short-term, which could be for a few months or up to a year, or permanent which is until the credit card balance is paid.

Credit card companies don’t publicize these programs because they hurt revenues due to the lowered interest rates. But for most banks, these programs are a better option than not getting any money back as a result of an individual’s default or bankruptcy.

Delinquency: Not a Good Strategy

There are a couple of things to keep in mind when approaching a credit card company about enrolling in a hardship program. Most creditors will want to look at your income and expenses so be prepared to explain your budget. The company will evaluate your ability to pay your debt to determine your eligibility.

They will also look at your account history, so it is a good idea to inquire about the program before falling behind on payments. Using delinquency as a strategy to get your creditor to work out a deal with you is a bad idea. You’ll get a more sympathetic ear if you approach them prior to missing a payment.

Hardship programs are not designed for reckless spenders who have maxed out their credit cards and are looking for an easy way out. They are aimed at debtors who have been hit by catastrophic, life-altering crises like a job loss, major illness, inability to work or loss of spouse or breadwinner. That is not to say that banks will not work with you if you don’t fit into one of these categories.

Stop the Plastic Habit

Be warned that these programs usually mean you will lose use of the credit card. In most cases, your charging privileges will be suspended or revoked. Some companies, however, have programs that restore your privileges upon completion of the program.

Entering a hardship program could also impact your credit score. Before entering the program it is a good idea to ask what repercussions this could have on your credit. Some companies negatively report this information to credit bureaus. Sometimes the negative references on your credit are removed after the program is completed. When negotiating with your creditor about being placed on the hardship track, it is important to understand the card issuer’s policies and the consequences.

The policy on credit reporting depends on the company. Most short-term plans are no more than a year. Long-term plans can go as long as five years. American Express, for example, doesn’t negatively report borrowers on short-term programs. But those who are on long-term programs should expect large dings on their credit regardless of what bank or issuer you owe.

source: foxbusiness.com