Local Exchange: Argentina Launched the Exchange of Sovereign Bonds in US dollars Governed by Argentine Law

1. Context and Regulatory Framework

 

The terms and conditions of the exchange offer for the restructuring of public instruments in foreign currency issued under Argentine law were approved by Law No. 27,566 (published in the Official Gazette on August 8, 2020), which was passed by the Argentine Congress by means of a fast-track legislative process, in the terms of the bill submitted by the Argentine Executive. For further details on the universe of eligible bonds and the structure of the offer, please refer to our article Bill for the Restructuring of Sovereign Debt in US Dollars Governed by Argentine Law. The only amendment to the Argentine Executive’s bill included by the Senate was the one related to the validity of the Rights Upon Future Offers or “RUFO” clause, so that it applied as from the date in which the law entered into force, and not as from the expiration of the invitation to the exchange, as provided in the original bill.

 

Within the framework of the international exchange offer and after the announcement of the agreement in principle reached between Argentina and three groups of creditors holding bonds governed by foreign law, the Argentine Executive approved the amendments to the terms of such offer by means of Decree 676/2020, published in the Official Gazette on August 16, 2020. On August 31, 2020, Argentina announced the results of the exchange of sovereign bonds governed by foreign law: 99% of the eligible bonds were restructured, as a result of having achieved an acceptance level of 93.55%. For more information on the amendments to the exchange offer of sovereign bonds governed under foreign law, please refer to our article Sovereign Debt Exchange under Foreign Law: Second Amendment to the Offer.

 

Decree 676/2020, which approved the amendments to the foreign offer, also amended the terms of the new bonds to be issued under Argentine law within the framework of the local exchange (which had originally been approved by Law No. 27,566 just a few days before), to mirror the amendments implemented in the foreign offer. According to the announcement of the Ministry of the Economy, with these amendments the bondholders under local legislation are being given equal treatment vis-à-vis the bondholders under foreign legislation.

 

2. Adaptation of the Local Exchange Offer to the Improvements made under the Foreign Offer

 

In line with the economic improvements implemented in the foreign exchange offer to the extent applicable to the new instruments to be issued in the local exchange, the amendments of Decree 676/2020 to the terms and conditions of the bonds initially approved by Law No. 27,566 mainly consist of improvements in certain principal and interest payment dates of the new bonds offered in the proposal, in the following terms:

 

1. Semiannual payments: The interest and principal payment dates for the new bonds will be January 9 and July 9 of each year -instead of March 4 and September 4.

 

2. New bonds to be delivered as accrued and unpaid interest consideration: The new bonds that will be delivered to the bondholders as consideration for the accrued interest (the “USD 2029 1% BOND - L.A.”,  where “L.A.”, after its acronym in Spanish, means governed by Argentine law), will begin amortizing in January 2025 and mature in July 2030 -originally, such bonds began amortizing in March 2027 and matured in 2030.

 

3. New 2030 Bonds: The new bonds due 2030 (the “USD 2030 BOND - L.A.”), will begin amortizing in July 2024 and mature in July 2030, with the first installment being in an amount equivalent to one half of each remaining installment. Before the amendment, these bonds began amortizing in March 2025, in twelve equal semiannual installments.

 

4. New 2038 Bonds: The new bonds due 2038 (the “USD 2038 BOND - L.A”) will begin amortizing in July 2027 -instead of March 2028- and mature in July 2038.

Decree 676/2020 also amended the maximum issuance amounts of certain new bonds.

 

For more details on the terms and conditions of the offer according to each eligible bond, please  refer to Annex III of Decree 676/2020 and the financial conditions of the new instruments, set forth in Annex IV of Decree 676/2020 (both in Spanish).

 

3. Procedure for the Exchange, Timeline and "Sweetener" for Early Acceptance

 

The procedure to implement the local exchange proposal was approved by Resolution No. 381/2020 of the Ministry of the Economy, published in the Official Gazette on August 18, 2020, date as from which the exchange is open. In addition to regulating the procedure, the Resolution appointed Caja de Valores S.A. as the exchange agent.

 

The relevant dates for the exchange offer are the following:

 

1. Early Acceptance Term: from the opening date (August 18) and until September 1, 2020, inclusive.

 

2. Late Acceptance Term: from September 2 up to and including September 15, 2020 which is the date when the offer expires unless the Ministry of the Economy extends it or terminates it early.

 

3. Issuance Date of the New Instruments: September 4, 2020, date as from which the new instruments will begin to accrue interest regardless of their settlement date, detailed in points D and E below. This date is the same as the expected settlement date under the foreign offer.

 

4. Settlement Date of the New Instruments for holders who entered during the Early Acceptance Term: September 7, 2020.

 

5. Settlement Date of the New Instruments for holders who entered during the Late Acceptance Term: September 21, 2020.

 

Holders of eligible instruments who enter during the Early Acceptance Term will receive as a  sweetener the interest accrued from the last payment date until September 4, by means of the delivery of the new bonds due 2029 and, for those holders who enter during  this term and choose the new Peso-denominated bonds BONCER 2026, a priority allocation procedure is provided. Those who enter later (this is, after the Early Acceptance Term) will collect interest accrued until April 6 (date on which Decree No. 346/20 entered into force, providing for the deferral of payments under the eligible bonds).

 

For more details on the procedure and characteristics of the exchange, we refer to Annex I of Resolution No. 381/2020 of the Ministry of the Economy (in Spanish).

 

4. Closing Remarks

 

The local exchange procedure is open, and its expiration term is scheduled for September 15. In the upcoming days, the results and the acceptance level of this local exchange will be known.