LONDON / BUENOS AIRES (Reuters) – Argentina has reached a deal with its creditors to restructure around $ 65 billion in sovereign debt, breaking a deadlock in talks that will help the country emerge from default and ban debt. fears of a damaging and prolonged legal impasse.

The Ministry of the Economy said in a statement here On Tuesday, he had reached an agreement with the main creditors after agreeing to adjust certain payment dates and legal clauses to soften what had been presented as his “final” proposal made in early July.

A deal will help erase memories of Argentina’s last major default in 2001-2002, which led to more than a decade of litigation and left it pariah in global financial markets.

“Early this morning, we finally came to an agreement and took a decisive step,” Economy Minister Martin Guzman said at an evening press conference, adding that the agreement was essential to release the public sector of a “situation of asphyxiation”.

He said the deal had the support of a majority of creditors and Argentina would seek to win over anyone undecided.

A major grain producer and once one of the richest countries in the world, Argentina fell into its ninth sovereign default in May and is heading for an estimated economic contraction of 12% this year after two years of recession.

The three groups of creditors – the ad hoc group, the Argentinian creditors’ committee and the group of swap-bondholders – said they were happy to have reached an “agreement in principle” providing for debt relief and would lead to renewed access to international capital markets for Argentine issuers.

“The deal is a good result for all involved and offers an offer that all creditors should support,” they said.

The ministry said it would extend the deadline for creditors to formally accept the new deal to August 24. It was due to expire on Tuesday.

ACQUIRED BOND MARKETS

The deal raised sovereign bonds by 8.7% on average after a rally on Monday in anticipation of a deal.

The country was at an impasse with its creditors, including reputable funds such as BlackRock BLACK.N and Ashmore ASHM.L, on debt restructuring.

Investors were cheered by the announcement of a deal.

“This is something the major bond groups can accept,” said Graham Stock, emerging markets strategist at creditor BlueBay Asset Management, who said the average net present value of the new offering was 54.8 cents. for a dollar.

“The economic situation in Argentina is very difficult and a key objective for us was to ensure that there was sufficient liquidity for the government in the short term to help the government deal with the economic fallout from the coronavirus.”

Riccardo Grassi, risk manager at Mangart Capital Advisors, said the two sides had reached a “political compromise”.

“I wouldn’t say the creditors are happy, but we are happy this case has been resolved,” he added.

Gabriel Torres of rating agency Moody’s said the deal would allow the country to avoid “lengthy and costly legal proceedings with bondholders” and called for “credible and sustainable fiscal and monetary policies.”

CHANGE OF PAYMENT DATES

As part of the deal, the government said it would adjust certain payment dates for the new obligations set out in the offer in order to increase the value of the offer.

The offer will also adjust certain legal aspects of collective action clauses (CACs), which determine how future changes can be made to obligation agreements. These had become a key point of contention in the talks.

Some bondholders feared Argentina would try to use CACs to adopt a “Pac-Man” strategy of trying to get them on board one by one.

Carlos de Sousa of Oxford Economics said the changes and the deal with major creditors meant a deal was almost in the bag.

“It should be easy now to achieve the qualified majorities required for a successful debt swap,” he said.

Under the deal, the payment dates for the new bonds will be January 9 and July 9 instead of March 4 and September 4. The new bonds will begin to amortize in January 2025 and mature in July 2029.

Moderate Peronist President Alberto Fernandez and Guzman had insisted Argentina was unable to improve on the offer made in early July, although people close to the talks said there could be a margin. maneuver to soften the offer.

Argentina struck a $ 57 billion loan deal with the International Monetary Fund in 2018 and said it would seek a new program with the fund after concluding talks with private creditors.

“A very important step. Expect a positive conclusion for the benefit of all, ”IMF Director Kristalina Georgieva said in a congratulatory message on Twitter.