The end of an era: Argentina’s deal with the holdouts


As you may remember, long, long time ago, back in 2001, Argentina faced its worst economic crisis, leading to a default on its bonds. Following the default, Argentina made it through - with the unforgettable succession of four presidents in less than 3 months - and was able to re-negotiate part of this defaulted debt in two separate blocks (one in 2005 and the other in 2010). But a significant group of investors refused all proposed re-negotiations of the defaulted debt. 

Re-negotiated bonds

They wanted all the money owed by virtue of these bonds and they issued proceedings before the courts of New York, which had jurisdiction over the original bonds. The lesson was learned and the re-negotiated bonds were issued under Argentinian law and subject to Argentina’s jurisdiction.

Long story short, the holdouts won their case before the courts of New York. They obtained an injunction preventing Argentina from making payments to those bondholders that did accept the restructured bonds, unless equal treatment was granted to the holdouts. Since then, Argentina has been in a technical default: unable to pay neither the holdouts nor the restructured bondholders.

Mauricio Macri

In December 2015, Argentina welcomed a new president (Mauricio Macri) who promised throughout his presidential campaign that the holdouts issue would be one of the top priorities of his new government, along with foreign exchange and currency control regulations.
On 5 February 2016, Argentina’s new Ministry of Finance and Public Credit publicly announced the terms of a proposal to eligible holders of any series of bonds of Argentina. The governmental proposal to the holdouts involved the payment of 100% of the principal and a 40% discount on the interest (a 25% haircut on the total amount due pursuant to the courts of New York’s decision). This proposal was originally accepted by a group of Italian holdout bondholders and later by some of the largest remaining holdout institutions. Mr. Prat Gay, Argentina’s Minister of Finance, said during his presentation of the proposal:

There are no countries in the modern world that can grow without access to credit

The settlement agreement was subject to the following conditions precedent:

  1. the approval of the terms and conditions of the offer by the Argentine Congress;

  2. the repeal or abridgement of “Lock Law” (prohibiting Argentina to offer holdouts a better deal than the one accepted by holders of the restructured bonds) and

  3. the U.S. District Court for the Southern District of New York permanently lifting all pari passu injunctions granted to certain holders of defaulted Argentine bonds.


On 16 March 2016, Macri received his first (overwhelming) victory in Congress: 165 votes over 86 approved the holdout proposal

At the Argentine Senate 15 days later, his strength was confirmed. On 31 March 2016, Senators voted 54 against 16 in favor of the payment to the holdouts. The discussion was closed, and Argentina is now ready to issue new bonds and to return being a trustworthy debtor. The Government has confirmed that the payment to the holdouts shall be made in cash (derived from a new issuance of debt of up to USD 12.5 billion) and not from the Central Bank USD reserves.


It seems that winds of change are blowing in Argentina. The end of an era, some may say. What can be argued without a shadow of doubt is that Argentina is willing to return to what it used to be, and it has what it takes to regain a leading place.



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