Government buys back US$1 billion of foreign debt

Sergio Massa says Argentina will buy back global bonds maturing in 2029 and 2030 in bid to improve debt and risk profile.

Tghe government has announced it is buying back US$1 billion of overseas debt in a move to improve its debt and risk profile.

The measure, confirmed via a resolution published in the Official Gazette and announced by Economy Minister Sergio Massa at a press conference on Wednesday, will see the government repurchase foreign bonds worth US$1 billion.

The official said he had authorised “a process of repurchase of Argentina’s foreign debt for more than US$1 billion” in a bid to “further improve Argentina’s debt profile.”

“We understand that this is where we have to attack for the best debt management, the debt profile and the maturity profile of Argentina,” he added.

Massa said the operation was aimed at “returning the country to a place of participation in capital markets.” The Central Bank would be tasked with carrying out the repurchases on behalf of the Treasury to allow for greater transparency, he added.

During a brief presentation, the official said the move would target “global bonds, especially those maturing in 2029 and 2030” and lead to “better debt management.”

Buying back the debt would allow Argentina to “continue improving [its] external debt profile,” country risk credit rating and improve the chances of the government and national firms accessing capital markets.

Massa called on the private sector to take similar steps with their own liabilities and said President Alberto Fernández’s government would take similar measures in the coming months.

“Some of the projections we had have been modified, such as those related to weather and the growth in the value of export products or lower levels of [energy] imports” than had been outlined in the government’s 2023 budget bill, he explained.

Underlining that fiscal order depended on the “management of liabilities,” Massa said that Argentina

had improved its debt maturity profile in pesos over the last 12 months and that its EMBI JP Morgan country risk rating – a benchmark for investors – had fallen by around 1,000 points as a result. The government had decided to buy back the foreign debt in order to take advantage of this “window of opportunity,” said the minister.

Most of the securities to be repurchased were issued as part of the debt restructuring with private creditors for US$66 billion in 2020. Markets reacted positively to the move with the price of Argentina’s international bonds rising by more than 11 percent on Wednesday.

The move arrives amid an atmosphere of uncertainty following a sustained rise of the so-called ‘blue dollar’ on parallel exchange markets, in the main due to increased demand from tourists and travellers.

The informal or ‘blue’ market has a scant volume of operations but functions as a sensitive indicator of expectations.

“The holiday season is generating upward pressure. Many Argentines who decide to travel abroad are going to buy dollars on the ‘blue’ [market] because they have very restricted access to the official exchange rate and the stock exchange,” said analyst Lucio Garay Méndez.