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New provisions for payments of principal and interests derived from financial indebtedness in foreign currency

The Central Bank of the Argentine Republic (the “Central Bank“), through Communiqué “A” 7133 dated October 9, 2020 (the “Communiqué 7133“), established new measures to access to the Argentine exchange market for pre-payment of financial indebtedness incurred with creditors abroad and debt securities denominated in foreign currency, within the framework of the provisions set forth by Communiqué “A” 7106 dated September 15, 2020 (“Communiqué 7106“), related to principal payments of such financial indebtedness scheduled between October 15, 2020 and March 31, 2021.

In this regard, the following restrictions were established:

 

i) Pre-payment of financial indebtedness under refinancing processes

 In case of pre-payments of principal and interests derived from financial indebtedness incurred with creditors abroad and debt securities denominated in foreign currency reached by the the debt refinancig process set forth in point 7 of Communiqué 7106 (i.e. the net amount for which access to the local excahnge market, in the original terms of such indebtedness, will not exceed 40% of the principal amount becoming due, and the remaining principal amount must be refinanced with a new foreign indebtedness with an average life of  at least 2 years), access to the local exchange market may be granted up to 30 calendar days prior to the maturity date of the principal and interest, to the extent that all of the following conditions are verified:

(a) the amount of interest paid does not exceed the amount of interest accrued for the refinanced indebtedness until the date the refinancing was executed; and

(b) the aggregate principal amount of new indebtedness may not exceed the aggregate principal amount of the refinanced debt.

 

ii) Pre-payments under the framework of exchange offers

 In case of pre-payments of principal and interests derived from financial indebtedness incurred with creditors abroad and debt securities denominated in foreign currency under the  framework of exchange offers, access to the local exchange market may be granted prior to the maturity date of such interests, to the extent that all of the following conditions are verified:

(a) the amounts paid before maturity corresponds to interest accrued at the closing date of the exchange offer;

(b) the average life of the new securities will be greater than the remaining average life of the exchanged securities; and

(c) the aggregate principal amount of the new securities may under no circumstances exceed the aggregate principal amount of the exchanged securities.

 

iii) Conditions for compliance with the refinancing process established by Communiqué 7106

Communiqué 7133 provides that the refinancing process established by Communiqué 7106 will be considered duly completed when the debtor accesses the local exchange market to cancel principal in an amount exceeding 40% of the principal amount due, to the extent that the debtor registers settlements in the local foreign exchange market as of October 9, 2020, for an amount equal to or exceeding the 40%, by way of  (a) new financial indebtedness abroad; (b) new issuance of securities in international capital markets; and (c) new issuance of securities in foreign currency with public registration in Argentina to the extent that the proceeds are settled in the local exchange market to Argentine pesos.

Likewise, in the cases of issuance of securities  in foreign currency with public registration in Argentina or abroad  issued as of October 9, 2020, which have an average life of not less than two years and whose delivery to creditors has allowed  the  achievement of the parameters foreseen in refinancing process, the requirement of settlement of procceds in the local exchange market to Argentine pesos will be considered fulfilled for the purposes of access to the local exchange market for the payment of principal and interest services.

Access the full text of Communiqué 7106  here.

Access the full text of Communiqué 7133 here.


This publication does not constitute a legal opinion on specific matters. If necessary, specialized legal advice should be sought.

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