Southern Cone debt, financing watch

Cash-strapped Argentina aims to postpone, to the end of December, payments on up to US$10bn of dollar-denominated debt issued under local law and due this year.

In a decree, the government cited the negative impact of the coronavirus crisis.

Argentina is trying to restructure about US$100bn in foreign currency debt held by private investors. The coronavirus outbreak has hampered the progress of debt talks. 

The country says its debt burden is unsustainable and the IMF has backed haircuts for private bondholders.

The government, with limited fiscal firepower, has announced measures to help mitigate the impact of a national lockdown on families and SMEs.

President Alberto Fernández has said the health of Argentines, rather than the economy, was his priority.

On Friday, Moody’s downgraded Argentina to ‘Ca’ from ‘Caa2’.

“The Ca rating reflects Moody's expectation that private creditors will likely incur substantial losses in the current government debt restructuring process as the economic and financial shock stemming from the pandemic compounds the funding stress that forces the government to reduce its upcoming debt payment obligations in the coming years,” the rating agency said.

Meanwhile, state-run development bank BICE said it had established a 1bn-peso (US$15.4mn) pot to provide working capital loans to SMEs and microenterprises.

The government recently said it would create a 30bn-peso loan guarantee fund to help SMEs gain access to working capital loans.

In related news, local corporate finance advisors First Capital Group, citing central bank data, said Argentina’s portfolio of business loans stood at 593bn pesos at the end of March, up 16% compared with a month earlier. Compared with 12 months earlier, the loan book was 61.3% bigger, making business loans the fastest-growing segment.

The March rise was linked to the coronavirus crisis, as companies, because of a lack of funds or because they wanted to prioritize liquidity amid the uncertainty, avoided making debt repayments, First Capital said. 

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Across the Andes in Chile, amid calls from some quarters for deeper emergency economic measures, the chairman of state lender BancoEstado, Arturo Tagle, said the scope of loan guarantee fund Fogape should be widened. 

The fund is currently geared to small companies but could be beefed up and made available to bigger firms, local paper La Tercera reported Tagle as telling the senate’s finance committee. 

He added that lawmakers must explore various funding options to help support large firms. 

Authorities have already changed the rules governing Fogape, temporarily raising the annual revenue ceiling for qualifying borrowers to 350,000 UF (inflation-linked units, about US$11.6mn). 

The government recently announced a US$500mn injection into the bank as part of an US$11.8bn package of measures targeting businesses and families. 

Tagle said the bank, for now, may not need the US$500mn but that in the future such resources, or even more, may be required.

State-owned Fogape holds loan guarantee tenders for banks and non-bank financial institutions as a way to improve access to financing for micro and small enterprises, and small exporters.

BancoEstado administers Fogape under the supervision of financial services watchdog CMF.

Quarantine and social distancing measures in parts of Chile are weighing on economic activity.