Argentine economy minister resigns amid deepening crisis

Nicolas Dujovne. (AFP)
Updated 18 August 2019

Argentine economy minister resigns amid deepening crisis

  • The country’s peso ended the week having shed 20 percent of its value against the US dollar

BUENOS AIRES: Argentina’s Economy Minister Nicolas Dujovne resigned after a week of economic tumult caused by President Mauricio Macri’s defeat in a primary poll ahead of a general election.

Dujovne will be replaced by Hernan Lacunza, economy minister for Buenos Aires province, Argentine media reported.

The country’s peso ended the week having shed 20 percent of its value against the US dollar as both Fitch and S&P cut the South American country’s long-term credit rating, citing increased uncertainty and a rising risk of default.

Dujovne said, in a letter posted on the website of La Nacion newspaper, he was “convinced that, under the circumstances, the (government’s) management needs significant renewal in the economic arena.”

He leaves in the middle of a deepening economic crisis following last Sunday’s primary elections in which market-friendly Macri was dealt a huge blow in his bid for re-election when he polled 15 points less than center-left Peronist candidate Alberto Fernandez.

The primaries serve as a bellwether for general elections in October. Dujovne’s announcement marks the first change in Macri’s Cabinet since voters went to the polls.

Fitch, which downgraded Argentina’s credit rating two notches to “CCC,” said the center-right’s defeat “increases risks of a break from the policy strategy of the current administration of Mauricio Macri guided by a program with the IMF.”

Fernandez, now the clear favorite to unseat Macri, has questioned the reform program backed by a $56 billion rescue package from the International Monetary Fund.

Standard & Poor’s dropped Argentina’s rating a single grade from “B” to “B-.”

“My resignation is consistent with a government and political space that listens to the people and that acts accordingly,” Dujovne said, in a clear message to the Argentine electorate.


Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

Updated 52 min 16 sec ago

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

SINGAPORE: Cathay Pacific Airways has shelved plans for its first US dollar debt deal in 23 years, the airline said on Friday, after sources told Reuters that global investors had questioned the pricing due to civil unrest in Hong Kong.

The airline, the biggest corporate casualty of widespread anti-government protests in the Asian financial hub, on Friday lowered its second-half profit expectations, citing “incredibly challenging” conditions in its home market.

Cathay had started meeting investors in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a US dollar denominated bond, according to a term sheet issued at the time, seen by Reuters.

It would have been the first US dollar debt deal for Cathay since 1996 and had been touted as a landmark transaction for the airline given all of its debt is denominated in Hong Kong dollars.

The issuance was to be unrated, and two sources with knowledge of the matter said that Cathay was willing to pay 200 basis points over the US Treasuries rate to secure three-year or five-year funding, with the size and term of the placement dependent on demand.

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Cathay has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

However, investors demanded a higher price of at least 300 basis points over US Treasuries, which made the deal more expensive for Cathay, said the sources, who were not authorized to speak publicly about the matter. Cathay’s term sheet had said the transaction would be reliant on market conditions. A Cathay spokesman on Friday said the Hong Kong dollar private placement market was providing more funding opportunities and a debt issuance in that market was completed last month. “We will continue to monitor the US dollar bond market in future,” he said in a statement.

Dealogic data showed that Cathay raised $102 million in October and $64 million in May through Hong Kong dollar denominated deals.

The airline has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

Cathay had mandated Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank and HSBC to work on the shelved US dollar bond deal.