ARGENTINA said in September that it will no longer require Argentine borrowers to get prior approval from the central bank before making principal and interest payments on certain loans from foreign lenders.
The new policy applies to existing debts that have been restructured as follows. The lender must have agreed to write down the principal amount of the debt by at least 40% of its nominal value on the restructuring date. The interest rate cannot exceed the 6-month LIBOR rate plus 3%. Interest payments cannot be required more frequently than quarterly. The average life of the debt must be at least four years from the restructuring date. The lender must allow a grace period on principal repayments of at least two years.
Getting approval to repay other foreign debts will be more difficult, in view of the shortage of foreign reserves in Argentina, according to Diego Serrano Redonnet of the law firm Perez Alati, Grondona, Benites, Arntsen & Martinez de Hoz in Buenos Aires. “It is yet to be seen whether this new regulation will enhance the ability of companies to negotiate favorable restructuring deals with foreign creditors,” Serrano Redonnet said.