Argentina: Letter of Support of Joint Debt Restructuring Proposal

Argentina: Letter of Support of Joint Debt Restructuring Proposal

PR Newswire

NEW YORK, July 28, 2020

NEW YORK, July 28, 2020 /PRNewswire/ -- Global financial institutions representing 60% of the outstanding Exchange Bonds and 51% of the outstanding Global Bonds of Argentina's debt have collectively endorsed the below letter, sent to Minister Guzmán today, pledging their support for the Joint Proposal that the Ad Hoc Argentine Bondholder Group, the Argentina Creditor Committee, and Exchange Bondholder Group, submitted to the Republic on July 20.

The three major creditor groups, and various other investors, are working constructively with the authorities towards reaching a consensual resolution to Argentina's deal that is supported by a majority of creditors.

The Ad Hoc Argentine Bondholder Group is advised by White & Case LLP.

**********

July 27, 2020

Ministerio de Economía
Av. Hipólito Yrigoyen 250
C1086 AAB
Buenos Aires
República Argentina
Attention:  Minister Martín Guzmán

Re: Letter of Support of Joint Debt Restructuring Proposal

Dear Minister Guzmán:

For many months the Ad Hoc Argentine Bondholder Group, Exchange Bondholder Group, and Argentina Creditor Committee, together with others, have been engaged in good faith discussions with the Republic of Argentina (the "Republic") with the goal of achieving a consensual restructuring of the Republic's external debt.  In furtherance of this objective, on Monday, July 20, 2020 the three groups submitted to the Republic a Joint Debt Restructuring Proposal, a copy of which is attached hereto as Exhibit A (the "Joint Proposal"). 

The persons and entities listed below (the "Supporting Holders") are holders or investment managers or advisers to holders of Argentine Exchange Bonds or Global Bonds, each of which pledges its support for the Joint Proposal.  Collectively, the Supporting Holders hold 32% of the outstanding Exchange Bonds and 36% the outstanding Global Bonds.  When these figures are combined with other holders who have committed their support to the Joint Proposal but cannot be named for institutional reasons, supporters of the Joint Proposal represent 60% of the outstanding Exchange Bonds and 51% of the outstanding Global Bonds.

As you know, the Supporting Holders include some of the largest investors in Argentina, having committed very significant foreign direct investment in the country.  We are confident that a consensual resolution will provide a path towards even greater and more sustained investment in Argentina's growth sectors—including agribusiness, energy, mining, infrastructure and information technology—and a bright and sustainable economic future for Argentina's people. 

Supporting Holders:

AllianceBernstein
Amia Capital LLP
Amundi Asset Management
Aquila Asset Management ZH AG
Ashmore Investment Advisors Limited
Ashmore Investment Management Limited
Autonomy Capital (Jersey) L.P.
Ayres Investment Management LLP
BlackRock Financial Management, Inc. and its affiliates
BlueBay Asset Management LLP
Caius Capital LLP
Carronade Capital Management, LP
Contrarian Capital Management L.L.C
Dumont Global          
Farallon Capital Management, L.L.C.
Fidelity Management & Research Co.
GoldenTree Asset Management
Grantham, Mayo, Van Otterloo & Co. LLC
HBK Investments L.P.
Invesco Advisers, Inc.
Mangart Capital Management Ltd
Monarch Alternative Capital LP
Paloma Partners Management Company
Pharo Management (UK) LLP
T. Rowe Price Associates
Vega Asset Management
VR Advisory Services Ltd 
Wellington Management Company LLC
Western Asset Management Company LLC
Whitebox Advisors

Exhibit A

Joint Debt Restructuring Proposal of Ad Hoc Argentine Bondholder Group, Exchange Bondholder Group, and Argentina Creditor Committee

[See attachment.]

July 20, 2020 – Without Prejudice

Joint Debt Restructuring Proposal of Ad Hoc Argentine Bondholder Group, Exchange Bondholder Group, and Argentina Creditor Committee


Exchange Transaction


The Debt Restructuring will be consummated through an exchange offer to all holders of Global Bonds and Exchange Bonds (collectively, the "Existing Bonds") and will treat all series of Existing Bonds in a substantially similar manner (except as noted below).

 

Holders will be offered a menu of five (5) new series of USD-denominated New Bonds and five (5) new series of Euro-denominated New Bonds.

 

New Bonds offered in exchange for Exchange Bonds will be issued under the 2005 Indenture, and all New Bonds offered in exchange for Global Bonds will be issued under the 2016 Indenture, with modifications described in Schedule III, designed to address certain bondholder concerns while at the same time remaining faithful to the international financial architecture for sovereign debt that has been endorsed by the International Capital Markets Association and G20.  The modifications will apply to the 2005 Indenture only to the extent not already contained in the existing document.

 

Offer documentation for the Debt Restructuring, and terms of New Bonds, to be structured and documented to maximize bondholder participation.  All such documentation to be approved by respective counsel for the Ad Hoc Argentine Bondholder Group, the Exchange Bondholder Group, and the Argentina Creditor Committee.

 

Proposal Highlights

 

  • The Proposal uses the same bonds as proposed in the Argentine amended exchange offer.
  • The proposal will provide aggregate cash flow relief in excess of US$35 billion over a period of 9 years.
  • The proposal takes the average coupon to a rate of 3.4%.

 


Principal Amount of New Bonds


Existing Bonds will be exchanged for New Bonds at par (i.e., no haircut), with the exception that holders receiving the New USD Bonds 2030, New USD Bonds 2035, New USD Bonds 2046, New EUR Bonds 2030, New EUR Bonds 2035, and New EUR Bonds 2046, will receive $97 principal amount of such New Bonds for each $100 in principal amount of Existing Bonds exchanged.

 

The principal amount of certain series of New Bonds shall be capped as set forth in Schedule II, subject to adjustments resulting from the currency election mechanism.   Holders of Existing Bonds seeking to exchange into capped series of New Bonds may be reallocated to other series of New Bonds in accordance with a "waterfall" methodology to be included in the exchange documentation, as set forth in Schedule II.

 

Issuance caps on New Bonds to be defined by the aggregated maturity buckets (aggregating all currency bonds in the same maturity bucket). The aggregated buckets are defined as follows:

(1)  Combined aggregated cap on New USD Bonds 2030 and New EUR Bonds 2030

CAP 2030 = USD 13.8bn + EUR 3.1bn * applicable exchange rate

(2)  Combined aggregated cap on New USD Bonds 2035 and New EUR Bonds 2035

CAP 2035 = USD 23bn + EUR 2.8bn * applicable exchange rate

  Schedule II defines the priority waterfall in terms of these caps.


Currency Election


The New Bonds will be issued in U.S. dollars and Euros. Holders of the Existing bonds will have a right to elect to receive New Bonds denominated either in U.S. dollars or in Euros with the exchange ratio being based on the average exchange rate for EURUSD and USDCHF computed 5 business days prior to the expiry of the exchange offer (applicable exchange rates).


Maturity Dates


The New Bonds will reflect an extension of existing maturities, with the earliest final maturity date in 2030 and an average maturity of 12.1 years.  Please refer to Schedule I for a detailed maturity schedule.


Amortization


The New Bonds will be subject to amortization, with principal to be repaid in semi-annual installments in accordance with Schedule I.  Amortization will begin in 2025.


Treatment of Accrued Interest


Any and all accrued and unpaid interest as of the Settlement Date will be compensated for by the issuance of the New USD PDI Bond 2030 and the New EUR PDI Bond 2030, in accordance with the terms provided in Schedule I.


Interest Rate for New Bonds


New Bonds shall accrue interest as from September 4, 2020 (the Settlement Date). Interest shall be payable semi-annually in arrears for each series of New Bonds at the respective annual rates, in cash, as provided in Schedule I; provided that the initial interest period shall extend through July 30, 2021 and the corresponding interest shall be paid in a single payment on July 30, 2021.

 

Treatment of Local Law Debt

Argentina to restructure local law FX debt, with such debt to receive no better treatment than the Existing Bonds.

Total Cash Flow Relief

The above treatment of Existing Bonds will provide aggregate cash flow relief in excess of USD 35,000,000,000 over a period of 9 years under the methodology used by the Argentina government.

Average Coupon Reduction

The proposal takes the average coupon to a rate of 3.4%.


Creditor Group Fees

On the Effective Date, Argentina will pay all legal and financial advisory fees and expenses of the Ad Hoc Argentine Bondholder Group, the Exchange Bondholder Group, and the Argentina Creditor Committee, respectively, related to the restructuring.

Schedule I: Specific Terms of Each Series of New Bonds

The New USD Bonds 2030 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

1.000%

2023

1.125%

2024

1.250%

2025-2027

1.500%

2028-2030

2.000%

 

The New USD Bonds 2035 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

2.000%

2023

2.700%

2024

3.250%

2025

3.875%

2026

4.250%

2027 – 2035

5.000%

 

The New USD Bonds 2046 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

2.000%

2023

2.700%

2024

3.000%

2025

3.625%

2026-2027

4.000%

2028

4.375%

2029-2046

5.000%

 

The New USD Bonds 2038 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

2.250%

2023

3.875%

2024

4.625%

2025-2038

5.000%

 

The New USD Bonds 2041 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

2.250%

2023-2029

3.625%

2030-2041

4.875%

 

The New USD 2030 PDI Bond

For every dollar or dollar equivalent of accrued interest, Holders of Existing Bonds will receive a New Bond that will:

 

Interest Payment Dates falling in

Cash

2021-2030

4.900%

 

The New EUR Bonds 2030 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022-2023

0.500%

2024-2027

0.750%

2028-2030

1.250%

 

The New EUR Bonds 2035 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

1.500%

2023

2.200%

2024

2.750%

2025

3.125%

2026

3.500%

2027 – 2035

4.250%

 

The New EUR Bonds 2046 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

1.500%

2023

2.200%

2024

2.500%

2025

2.875%

2026-2027

3.250%

2028

3.625%

2029-2046

4.350%

 

 

The New EUR Bonds 2038 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

1.600%

2023

3.250%

2024

4.000%

2025-2038

4.375%

 

The New EUR Bonds 2041 will:

 

Interest Payment Dates falling in

Cash

2021

0.125%

2022

1.600%

2023

2.975%

2024-2029

3.000%

2030-2041

4.500%

 

The New EUR 2030 PDI Bond will:

For every euro or euro-equivalent of accrued interest, Holders of Existing Bonds will receive a New Bond that will:

 

Interest Payment Dates falling in

Cash

2021-2030

3.900%

 

Schedule II: Bond Issuance Caps


New Bonds


Issuance Caps


Priority "Waterfall"


New USD 2030 Bond

 


USD 13,800*

Priority Group 1 USD, followed by Priority Group 2 USD, followed by Group 3 USD



New USD 2035



USD 23,000*

Priority Group 1 USD, followed by Priority Group 2 USD, followed by Group 3 USD


New USD 2038 Bond

 


No Cap


USD Discount 2033


New USD 2041 Bond

 


No Cap


USD Par 2038


New USD 2046 Bond

 


No Cap


N/A


New EUR 2030 Bond

 


EUR 3,100*

Priority Group 1 EUR, followed by Priority Group 2 EUR, followed by Group 3 EUR


New EUR 2035 Bond

 


EUR 2,800*

Priority Group 1 EUR, followed by Priority Group 2 EUR, followed by Group 3 EUR


New EUR 2038 Bond

 


No Cap

 

EUR Discount 2033


New EUR 2041 Bond

 


No Cap


EUR Par 2038


New EUR 2046 Bond

 


No Cap


N/A

* Issuance caps of the New USD 2030 and the New USD 2035 will be increased by the amount of EUR/CHF-denominated Exchange Bonds and Global Bonds that elect to be part of the currency exchange mechanism, and issuance caps for the New EUR Bonds 2030 and the New EUR 2035 will be reduced accordingly. For clarity, the restrictions applicable to Priority group 1 EUR, Priority Group 2 EUR and Group 3 EUR to exchange into a New EUR 2030 or a New USD 2030 are only defined by the cap on the New EUR 2030 instrument. Once the cap has been satisfied, holders that have the right to receive the New EUR 2030, and have elected to participate in the currency exchange mechanism, will receive a New USD 2030, with such issuance not being contemplated as part of the cap on the New USD 2030 defined in the table. At the same time, the issuance of the New EUR 2030 is reduced by the same amount.

Priority Groups

-  Priority Group 1 USD: Argent 2021 USD, Argent 2022 USD, Argent 2023 USD
-  Priority Group 2 USD: Argent 2026 USD, Argent 2027 USD, Argent 2028 USD (old), Argent 2028 USD (new)
-  Group 3 USD: Argent 46 USD, Argent 48 USD, Argent 2117 USD
-  Priority Group 1 EUR/CHF: Argent 2020 CHF, Argent 2022 EUR, Argent 2023 EUR
-  Priority Group 2 EUR/CHF: Argent 2027 EUR, Argent 2028 EUR
-  Group 3 EUR/CHF: Argent 47 EUR                            

Schedule III: Indicative Legal Terms 


Restriction on Re-designation


The 2016 and 2005 Indentures and the Terms of the New Bonds shall include a qualified restriction on re-designation.


Restriction on Aggregation


The 2016 Indenture and the Terms of the New Bonds will include a qualified restriction on aggregation of bonds. 


Reserved Matters


The following matters will be added as Reserved Matters in the Indenture and terms of New Bonds:  (i) Identity of Obligor; (ii) Place of payment; (iii) RUFO; (iv) re-designation restriction; (v) single-limb aggregation restriction, and (vi) acceleration procedures and threshold.


Information Disclosure Covenant


The terms of the New Bonds will include a requirement for the Republic to periodically publish data on its public debt stock (including data on sub-sovereign debt and debt of state-owned enterprises or Public Sector Instrumentalities, as the term is defined in the Indenture).


Rights Upon Future Offers


The documents will contain a Rights Upon Future Offers provision that is materially identical to the Rights Upon Future Offers provision set forth in the Republic's prospectus supplement dated April 21, 2020


Rights of Beneficial Holders


The documents will permit beneficial holders of the New Notes to enforce rights and remedies under the Indenture that are currently reserved for the "Holder" under the 2016 Indenture.

 


Minimum Participation Condition


To be amended to reflect bondholder concerns.

 

 

Voltar noticias em Inglês