Bill for External Public Debt Restructuring

On January 21, 2020 the Argentine Executive submitted a bill to the Argentine Congress which provides for the restoration of the sustainability of the external public debt.

 

As stated in the message sent to the Argentine Congress by the Argentine Executive , “as a result of the current dramatic economic and social situation” the Argentine Republic declared a public emergency in economic, financial, fiscal, administrative, social security, utility prices, energy, public health and social matters by means of the Social Solidarity and Productive Reactivation Law No. 27,541. In relation to sovereign debt matters, such law authorized the Argentine Executive to carry out the procedures and take the necessary steps to recover and ensure the sustainability of the public debt. For more information, please see the article published in Marval News #198: https://www.marval.com/publicacion/disposiciones-en-materia-de-deuda-soberana-13487&lang=en

 

1. Main provisions of the bill

 

The bill sets forth general provisions aimed at granting the Ministry of Economy with the necessary tools to implement the external public debt restructuring.

 

1. Restoration of the sustainability of the external public debt – Authorization to the Argentine Executive

 

The bill declares that restoring the sustainability of the external public debt is a priority for the interest of Argentina, in the terms of article 65 of the Financial Administration Law No. 24,156. Such article provides that the Argentine Executive is able to restructure the public debt as long as it results in an improvement in the amounts, maturities and/or interest rates of the original bonds.

 

To achieve that goal, the bill authorizes the Argentine Executive  to carry out transactions to manage liabilities and/or exchanges and/or restructurings of payments of interest services and principal maturities of the sovereign bonds governed by foreign law.

 

2. Powers of the Ministry of Economy as application authority

 

The bill appoints the Ministry of Economy as the application authority of the law, and authorizes such Ministry to issue the necessary regulations to implement it.

 

The bill authorizes the Ministry of Economy, among other powers, to:

 

1. issue new sovereign bonds for the purposes of amending the debt profile of interest and principal for the purposes of restoring the sustainability of the external public debt;
2. determine dates, maturities, methods and procedures of issuance of the new bonds; and
3. approve and execute all contracts with indenture trustees, paying agents, information agents, custody agents, registrars, rating agencies and other intermediaries participating in the issuance of the new bonds.

 

In particular, the bill authorizes the Ministry of Economy to include clauses to subject the Argentine Republic to a foreign jurisdiction and provide a waiver for the defense of sovereign immunity exclusively with respect to claims in the relevant jurisdiction to be submitted to and in relation to the executed agreements and the public credit transactions implemented. The bill provides the assets/goods to which the Argentine Republic does not waive its sovereign immunity, including the assets and reserves of the Argentine Central Bank, public domain assets located within the territory of the Argentine Republic, assets aimed at the provision of essential public utilities/services, assets aimed at diplomatic purposes, and the assets protected by the applicable sovereign immunity laws, among other assets.

 

3. Financial advisors and placement agents

 

The bill provides for the power of the Ministry of Economy to appoint the financial institutions and/or financial advisors to act as coordinators to structure the issuance, placement agents and/or in the implementation of the public credit transactions and/or to act in the liability management and/or issuance of new bonds and/or the granting of other public credit loans. It also authorizes approving and executing the agreements with entities and/or financial advisors for the provision of the services mentioned above, specifying that the payment of fees cannot exceed 0.1% in the aggregate of the amount effectively exchanged and/or restructured, according to the particular technical specifications to be determined by the Ministry of Economy. Prior to executing the agreements, the General Audit Office must take part in the procedure.

 

4. Tax exemption

 

The bill exempts the transactions provided in the law from the payment of all national taxes that could be applied on such transactions.

 

5. Public policy – Entering into force

 

The bill states that the law constitutes public policy. It will enter into force on the date of its publication in the Official Gazette and for the term provided in article 1 of Social Solidarity and Productive Reactivation Law No. 27,541 (this is, until December 31, 2020, unless such law is extended).

 

2. Closing remarks

 

It is expected that the bill will be discussed and considered in the Argentine Congress in the next few days. By means of Decree No. 98/2020 published in the Official Gazette on January 22, 2020, the Argentine Executive included this bill within the matters to be considered by Congress during the period of extraordinary sessions.

 

If the bill is approved and the law is passed, the Ministry of Economy must define the specific terms and conditions to implement the restructuring.