Sovereign Analysis /
Argentina

Argentina in 8 charts: Charting our view towards debt restructuring

    Stuart Culverhouse
    Stuart Culverhouse

    Chief Economist & Head of Fixed Income Research

    Follow
    Tellimer Research
    10 February 2020
    Published byTellimer Research

    We are entering a crucial period in the process of Argentina's debt restructuring over the next few weeks. Economy Minister Guzman is due to present his long-awaited debt sustainability assessment (some time over 12-17 February) and the IMF technical mission gets underway (12-14 February), as the government tries to steer a path towards restructuring, according to its very ambitious (even not credible) timetable. It hopes to conclude a deal by 31 March. 

    Here, we illustrate a complex situation in eight charts. 

    Figure 1: Argentina’s public debt ratio has risen to over 90% of GDP (public debt/GDP – %)


    Source: Tellimer Research, Argentina Ministry of Finance

     

    Figure 2: Partly as a result of a sharp fall in the peso (ARS/USD)

    Source: Haver

     

    Figure 3: But, although high, its public debt burden is not suggestive of insolvency nor much higher than that of many other countries (public debt/GDP* – %)

    Source: Tellimer Research, Argentina Ministry of Finance, IMF WEO. *Data for 2019. 

     

    Figure 4: International bonds are also a relatively small part of the debt stock (composition of Argentina’s public debt – % share of total) 

    Source: Tellimer Research, Argentina Ministry of Finance

     

    Figure 5: Yet Argentina does face heavy debt service payments on its foreign bonds in the next few years, and wants cash flow relief, in order to provide breathing space to "grow" (estimated debt service on foreign law bonds – US$bn)

    Source: Tellimer Research, Bloomberg DDIS

     

    Figure 6: The government is also unwilling to commit to a deeper fiscal adjustment to restore debt sustainability, either inside or outside an IMF programme, which will transfer the burden to private creditors... (primary balance – % of GDP)


    Source: Tellimer Research, IMF

     

    Figure 7: ...Meaning bondholders may be placing a premium on bonds with perceived stronger legal protections as they prepare for restructuring (premium of Kirchner bonds over Macri bonds – price)*

    Source: Tellimer Research, Bloomberg. *Price difference of US$ discounts over average of 28s/36s. 

     

    Figure 8: Still, current low cash prices across the curve could offer sizable potential upside for bondholders in a friendly, negotiated restructuring involving a strong and well coordinated creditor group (Argentina foreign bond curve – price y-axis vs. years to maturity x-axis) 


    Source: Tellimer Research, Bloomberg

    Further reading

    1. Argentina: Restructuring plan – Four observations (7 February 2020)
    2. Argentina's restructuring timetable: Not a Buy signal (30 January 2020)
    3. Argentina: IMF technical mission positive, but still a long haul (29 January 2020)
    4. Argentina: Dreaming of Uruguay (10 October 2019)