Neuberger Berman positive after Argentina’s cash deal with creditors

Argentinian president Mauricio Macri has stricken a $4.65bn (€4.27bn) cash agreement with a number of US creditors, ending a 15-year dispute regarding Argentina’s default on its $82bn (€75.4bn) foreign debt in 2001.

Rob Drijkoningen, co-head of emerging market debt at Neuberger Berman, believes the end of the dispute will be positive for investors.

“Despite ongoing turbulence in Latin America, we are witnessing a number of opportunities in fixed income markets across the region. We have been particularly bullish on Argentina sovereign bonds for some time, which has been vindicated by news of a resolution with the holdouts of its defaulted debt,” he commented.

“Argentina’s new government has been making progress with its ambitious reform agenda – including the recently implemented free floating FX regime, as well as the adjustment of fuel price subsidies.

“With the deal agreed yesterday, involving $4.65bn of principal with the lead holdouts, a resolution with all holdouts is now very likely, resulting in Argentina shrugging off its ‘D’ credit rating.

“It would unwind full the default dating back to 2001 and its related default in 2014,” Drijkoningen added.

The deal needs to be approved by the Argentinian Congress but in Drijkoningen’s opinion, ” it will allow Argentina to come back to international capital markets once again.”

“While the related supply might depress prices temporarily, the broader developments are very positive for investors in the country, likely causing a reduction in the risk premium,” he said.

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