Buenos Aires, Argentina – Argentina missed interest payments to international creditors on Friday, thrusting the economically besieged country back into default territory.
But there was cautious optimism among analysts – and the government – as talks to restructure $66bn in foreign debt appeared to be making headway. If the new deal happens, it could stave off a more dramatic financial unravelling.
The country officially extended the Friday deadline for its external debt offer to June 2 “in order to continue constructive discussions”, Economy Minister Martin Guzman said in a statement.
“The negotiations continue on a course that we consider positive, with increasing mutual understanding,” said Guzman on Friday, noting that while there remains “an important distance to cover”, all sides are still at the table. “For Argentina, it is of the essence that the deal is aligned with the payment capacity of the country.”
The initial offer called for a three-year grace period on payments, a 62 percent reduction in interest payments and a 5.4 percent cut to the principal. It was rejected by key groups of bondholders, who have presented counterproposals. Reuters reported that Argentina intends to amend its offer in the coming days.
Argentina’s ninth sovereign default
Guzman’s statement also addressed $500m in bond interest payments that had been due on April 22. The 30-day grace period expires at 5pm EST (21:00 GMT) on Friday, after which the country would technically enter into default for the ninth time in its history, according to economists. Reuters reported that Argentina’s ambassador to the United States sent a letter confirming the country would postpone making the bond payments due Friday.
Guzman said the outstanding payment is “also part of these discussions, and we expect it to be addressed in the broader agreement that we are pursuing”.
Argentina’s failure to pay the interest “will result in defaults across the various bond issuances,” the Ad Hoc Bondholder Group, which includes major asset managers including BlackRock Financial Management, Fidelity Management & Research and AllianceBernstein, said in a statement. However, “the Group understands that Argentina has expressed an intention to engage with creditors over the next week to try to find a comprehensive solution,” the statement said.
The Ad Hoc Bondholder Group collectively holds about $16.7bn of Argentina’s international bonds.
Another important creditor committee said failing to remedy the default would “prevent access to the international capital markets needed for the recovery of the Argentine economy and therefore will be detrimental to the Argentine people.”
The novel coronavirus and the economic shutdowns it begot have raised the stakes in Argentina’s already high-stakes duel with bondholders. A virus-induced lockdown worsened Argentina’s grim economic picture, which includes 46 percent inflation, a rapidly devaluing currency and a drawn-out recession.
For Minister Guzman, the goal is to snap Argentina out of the vicious boom-and-bust cycles that have devastated ordinary citizens, and damaged the country’s relationships with investors. Part of the problem has been high coupon rates that are meant to compensate investors for greater risk but also turn Argentina into a riskier bet, Guzman explained during a discussion at the Council on Foreign Relations last week. “We want to build on realism,” he said.
Both sides closer to a deal
Gabriel Rubinstein, a former governor of the Argentine Central Bank and head of the Buenos Aires firm Gabriel Rubinstein & Associates, described Friday’s missed payment as a “selective default”, and one that could be remedied if a new deal is struck.
“Argentina did not pay an obligation that was due today, but it didn’t say it wasn’t going to pay the rest of its debt,” he said.
What happens next is, to a large extent, up to bondholders. Those who did not get paid on Friday can launch legal action. And if 25 percent of them get together, they could declare the entire debt, not just the interest payments, in default. Such a move would trigger a devastating chain reaction.
“As of today, the default is no longer decided by Argentina; it’s decided by the bondholders,” said Rubinstein. “But since we’re very close to a possible deal, no one thinks anyone is going to start to make legal moves, with lawyers, when things could be resolved in 10 or 15 days.”
“I think Argentina is just now showing a willingness to negotiate, which it wasn’t showing earlier,” he added. “It’s much more likely that we will have a deal, but it’s not definitive.”
Lucia Pezzarini, an economist with the Buenos Aires firm Ecolatina, said Friday’s missed payment is not similar to what happened in 2001, when the country defaulted on $95bn in bonds and spiralled into years of economic and political chaos.
But, it’s not harmless either, Pezzarini says, “because there are always repercussions with going into default”.
“For me, the relevant news of the day is that Guzman said he was going to present another offer in the next few days,” she said.
Mark Weisbrot, co-director of the Center for Economic & Policy Research in Washington, DC in the US, said the Argentine negotiations have already produced important changes – in particular, a shift in the position of the International Monetary Fund (IMF), which he said had pushed in the past for some of the policies that damaged Argentina. It now acknowledges that the country can’t afford its debt.
“There is now a recognition that it’s a mistake for all parties, and for the world, to try and force a government to maintain payments that aren’t sustainable,” Weisbrot said. “They could still end with an unsustainable solution, but this is progress – at least in how the negotiation is being interpreted by very influential actors like the IMF, and also the media.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
