Argentina clinches landmark debt repayment deal with Paris Club

Thu May 29, 2014 3:13pm EDT
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By Leigh Thomas and Sarah Marsh

PARIS/BUENOS AIRES (Reuters) - Argentina reached an agreement on Thursday with the Paris Club of creditor nations on repaying overdue debts in a landmark deal that should help the country put its record default behind it and open up much-needed sources of international financing.

The Club said the deal, reached in the early hours of the day in Paris, would allow Argentina to clear around $9.7 billion of arrears over the next five years. Deemed positive for Argentina by analysts, it lifted Argentine stocks and bonds.

Faced with an ailing economy and dwindling foreign reserves, Argentina has been on a push since late 2013 to resolve disputes with creditor nations and foreign firms in order access fresh funds and attract investments to its massive shale resources.

The country has been virtually shut out of capital markets since its 2001/02 default on roughly $100 billion.

"Argentina is continuing its path of regularizing and paying off the debt that 40 years of neoliberalism left us," Argentine Economy Minister Axel Kicillof told an Argentine radio station from Paris.

The deal is a key step toward lowering borrowing costs for Argentina that have been too high, in double digit figures, for it to consider issuing new foreign debt since its default.

But Argentina's sovereign bond yield spreads over U.S. Treasuries tightened only 7 basis points to 843 points on the EMBI Global index, reacting cautiously as the main challenge for the country to regain full access to market remains intact.

Argentina is still at loggerheads with "holdout" bondholders who have declined to participate in its debt restructurings.   Continued...

Argentine Economy Minister Axel Kicillof speaks during a news conference over the country's conditions for repaying its $9.5 billion debt to the Paris Club in Buenos Aires January 21, 2014. REUTERS/Enrique Marcarian