Argentine peso gets knocked lower, country risk soars as govt eyes debt 'reprofiling'
BUENOS AIRES - Argentina’s peso slumped on Thursday and its country risk soared to levels not seen since 2005 after the government announced plans to “reprofile” about $100 billion of its debt, leaving investors scrambling to assess what kind of hit they might face.
By the time Treasury Minister Hernan Lacunza said on Wednesday the government wanted to extend the maturitiesof short-term local debt instruments and would negotiate with holders of its sovereign bonds and with the International Monetary Fund, a debt revamp was already widely expected. Lacunza labelled the operation a “reprofiling” of obligations that will affect institutional rather than individual investors.
“It now looks like a disorderly phase of a debt restructuring with a piecemeal strategy of seeking debt relief without a comprehensive debt repayment plan,” Morden said in a note, adding, “capital controls could quickly follow as this official recognition of cash flow stress will only trigger further dollar demand and capital flight.”
“The re-profiling was already in the prices,” said Alberto Bernal, chief emerging markets strategist at XP Investments in New York.
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