Sovereign Analysis /

Argentina's restructuring plan: Four observations

    Stuart Culverhouse
    Stuart Culverhouse

    Chief Economist & Head of Fixed Income Research

    Tellimer Research
    7 February 2020
    Published byTellimer Research

    We make four observations, some new, some worth repeating, on Argentina’s plans for a sovereign debt restructuring ahead of a crucial period in the process over the next few weeks. 

    1. Creditor power: One of the lessons from the Province of Buenos Aires consent solicitation debacle (other than signalling the authorities’ unpreparedness, opportunism and “lack of a plan”) is creditor power (a message that might also have been repeated in the failed ARGDUO swap this week). 
    2. Legal complexities: We think the bonds’ different legal standings (some actual, some perceived) add to the complexity of a sovereign restructuring, making the ambitious timetable the government set out on 29 January even more challenging. 
    3. Public debt sustainability: We still do not know what the perimeter of the government’s foreign debt restructuring is, nor do we know on what basis the government thinks the debt is unsustainable.
    4. Cash flow: Although insolvency may be questionable, cash flow – or illiquidity – is a more legitimate concern (albeit stemming from a self-imposed negative confidence shock).

    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.