FILE PHOTO: Argentine one hundred peso bills are displayed in this picture illustration taken September 3, 2019. REUTERS/Agustin Marcarian/Illustration/File Photo
BUENOS AIRES (Reuters) – Argentina has swapped 4.34 trillion pesos ($21.66 billion) in domestic debt, amounting to around 64% of loans due to mature through June and helping to ease near-term fears of a debt default as the economy falters under pressure from a devastating drought.
The swap exchanges old debt for new bonds maturing in 2024 and 2025, according to an economy ministry statement Thursday.
“In this way, the uncertainty about the debt maturities of the coming months is cleared up, helping to preserve the sustainability of the Treasury debt,” the ministry said.
Argentina had initially hoped to swap around half of its total debt due, an official source told Reuters on the condition of anonymity earlier this week.
“Between banks, insurers and companies, the (swap) volume would be between 3 and 3.5 trillion pesos (around $17 billion),” they said, adding that swapping “anything above 50% will already be a great achievement.”
The swap, first announced Monday, prompted global rating agency S&P to slash Argentina’s local currency rating to ‘SD/SD’ (selective default) from ‘CCC-/C’ Thursday. It also downgraded Argentina’s national rating to ‘SD’ from ‘raCCC+’.
Argentine stocks and bonds also fell Thursday as investment funds flocked for the exit following news of the debt swap, which aims to ease market uncertainty in an election year and amid a stalling economy.
Though the debt swap is technically voluntary rather than a forced restructuring, the agency – and indeed the markets – still appear to view it as a distressed event.
This is Argentina’s third bond swap since August 2022.
Argentina also still has an eye-watering estimated $170 billion of local debt due, given the swap only pushes back the payment deadline.
Meanwhile, a historic drought in Argentina has squeezed the economy, which is already battling an expected annual inflation rate of some 100%.
Economy Minister Sergio Massa recently described the swap as “giving predictability” to the market to improve access to credit.
The opposition led by the “Juntos por el Cambio” coalition have criticized the latest measure since the new maturities will need to be handled by the incoming government following the October elections.