NEW YORK, Nov. 24, 2020 /PRNewswire/ -- Over the past five years, institutional asset managers have provided Argentine provinces with over $10 billion in financing for infrastructure projects, social programs, green energy development, environmental remediation and other critical capital projects and public services. Such financing has promoted economic growth and inclusion and enhanced the productive capacity of provincial borrowers.
Many of these provinces have historically maintained low levels of indebtedness and enjoyed access to debt capital markets based on their responsible approach to debt management, including during periods in which the national government has been in default. Today, however, some provinces have opportunistically sought to escape these obligations through unilateral and opportunistic defaults. In many instances, this conduct has been instigated by the national government, which appears to be seeking to impose substantial losses on lenders as a matter of misguided principle rather than based on the facts and circumstances surrounding each province.
The Coalition of Argentine Provincial Bondholders (CAPB) is profoundly concerned that an opportunity to pursue responsible policies that could ensure medium- and long-term access to capital markets to support provincial investment needs is being frustrated by short-sighted politics and indiscriminate repudiation of the contractual basis of agreement reached between the provinces and their lenders.
In response to these developments, the CAPB finds its necessary to publish basic principles that must govern any restructurings of provincial debt:
- Defaults and restructurings impose long-term costs and consequences for the provinces and their economies and should only be undertaken in cases of extreme duress
- Opportunistic restructurings of otherwise sustainable debt burdens are unacceptable and should be rejected by all stakeholders. Neither are such efforts in the self-interest of provincial borrowers, as lost access to capital markets will have long-term costs
- Debt restructurings must take place on the basis of transparency and good faith and be free from unjustified interference by third parties, including the national government
- If a restructuring is unavoidable, future debt service must be determined based on an accurate assessment of the province's repayment capacity and included in the fiscal budget. In budgeting, provinces must be willing to designate a reasonable portion of revenues for servicing of contracted debts
- Any losses imposed on lenders should not be politicized, including by reference to arbitrary "acceptable NPV recoveries"
- The sustainability of reinstated debt must be determined based on the assumption that market-based refinancing is available in the medium-term
The CAPB was formed by institutional asset managers holding more than $3 billion of provincial debt to engage on behalf of these institutions with key stakeholders, including provincial creditor committees, the International Monetary Fund and other international financial institutions, bilateral credit and development agencies, and interested governments, media, and nongovernmental organizations.
Retail and institutional holders of Argentine provincial bonds are invited to contact the CAPB ([email protected]) or visit its website at www.arg-prov-coalition.org for up-to-date information and additional resources on specific processes and restructuring proposals.
SOURCE Coalition of Argentine Provincial Bondholders