Updated 10:52 AM EST, Thu, Dec 02, 2021

Argentina to Pay $1.35 Billion to Italian Investors Holding Defaulted Bonds

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Argentina has agreed to pay a group of Italian investors $1.35 billion as they have been holding defaulted bonds. While this is a big step to the Latin American nations, as they have reached an agreement with creditors who initially refused to participate in restructurings, the amount only represents 54 percent of the total creditors' claim that reached $2.5 billion in 2001.

According to Merco Press, finance minister Alfonso Prat-Gay noted that the agreement with the Italian bond- holders included the government's acknowledgement of the debt as well as "reasonable interest." 

He said, "It represents approximately 15% of the debt that remained outside the (rescheduling) accords."

The $1.35 billion includes the debt and interest, as Task Force Argentina, which represents some 50,000 Italian bondholders, agreed to the deal that the government will pay about $900 million of their debt plus the said interest. Still, as Merco Press noted, the total amount comes to about 150 percent of the principal.

MenaFN noted that the talks have already opened in New York on Monday between Argentine Finance Secretary Luis Caputo and creditors, who were mediated by a court-appointed lawyer named Daniel Pollack.

Bloomberg Business noted that there were originally around 180,000 Italians represented by the TFA before restructuring began in 2005. About 70 percent of them have either entered into the exchange agreements or died, as most of the members were between 60 and 80 years old, investing between $25,000 to $50,000 in the debt.

While most of the bondholders accepted write-offs in the beginning of their restructuring, many of the bondholders still held out for full payment, including the hedge funds.

However, the new agreement is only the first step in the efforts made by President Mauricio Macri to settle the holdout creditors, just after the country obtained a $5 billion loan from several Wall Street Banks. Macri, who has only been in office for nearly two months, vowed to resolve the problem to bring the country back to "international capital markets."

Prat-Gay said about Macri's negotiation tactics, "President Macri wants to strike an agreement as quickly as possible and in the fairest way possible." Unfortunately, the government also had to deal with the fact that there are bondholders who want to collect more than their share.

Until then, these bondholders will have to wait their turn to get paid. TFA head Nicola Stock said, "Our stakeholders should be happy considering what they were offered at the beginning. I expect the Italian holdouts to get paid between May and June."

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