Macri Winning Support for Deal With Argentine Bondholders

  • Three opposition blocs set to approve bill following talks
  • Chamber of deputies to start debate on bill later today

Argentine President Mauricio Macri is winning support in Congress for a deal with creditors, ending a 15-year dispute with holdout bondholders and paving the way for new debt sales.

The government reached an accord with three opposition blocs yesterday, finance committee President Eduardo Amadeo told Radio 10 Tuesday. Debating in the lower house will begin at midday and is expected to last 18 to 20 hours before voting, after which the bill will pass to the senate.

“We’ve got quorum and we think we’ve got the necessary number to get approval in the lower house for this bill that is the beginning of the path to ending a dark story in Argentina’s history,” Amadeo said.

Failure to approve the bill would have left Argentina cut off from credit markets at a time when it’s trying to close the largest fiscal deficit in almost 20 years. Finance Minister Alfonso Prat-Gay told investors last week that Argentina “was back” and that they should invest now or miss the boat of resurgent growth. That message will get renewed force if Congress approves the debt bill, clearing the way to the sale of $11.7 billion in bonds to repay holdouts from the country’s default in 2001.

Led by Sergio Massa of the Renovation Front and Diego Bossio of another breakaway Peronist bloc, the opposition had wanted guarantees that Argentina won’t be subject to further litigation.

The government secured support from Massa and Bossio on Monday but only after making concessions. The opposition managed to include clauses to ensure any bond sales include a collective bargaining clause, forcing creditors to negotiate together, and to limit the commission paid to intermediary banks, Infobae reported citing sources in congress it didn’t name.

“The Finance Ministry’s lawyers came early in the morning yesterday to hear the latest proposals and the ones that worked we accepted with great pleasure,” Amadeo said, without giving details.

While the opposition alliance has the majority in the Senate, it is riven by divisions and most of their legislators will be open to bargaining in exchange for funds that benefit their provinces, said Juan Cruz Diaz, managing director at the regulatory risk advisory firm Cefeidas Group. Senators who vote against the holdout bill on Tuesday would be damaging their province’s chances of gaining much-needed credit.

The failure to agree on paying the holdouts would have financial repercussions that would have “a remarkable spillover effect in provinces, with a social cost that no politician desires to load on their back,” Juan Martin Cappellini, an analyst at TPCG Group, wrote in a report.

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