MercoPress. South Atlantic News Agency

Argentina's debt offer will not be modified

Roberto Lavagna, Argentina's economy minister, has warned the country's private creditors that the government will not modify the debt-restructuring offer it made in Dubai last year.

In an interview with the FT this week, Mr Lavagna said bondholders had either misinterpreted the Dubai offer or had simply ignored aspects of it that would significantly improve recovery values. One of those, he said, was a bond linked with economic performance.

Argentina's private creditors are growing increasingly impatient, claiming that the government is deliberately avoiding negotiations to restructure about $100bn (?81bn, £51bn) of defaulted debt. They have dismissed the Dubai offer as "not serious", arguing that it implies a write-off in net-present-value terms of 92 per cent.

But Mr Lavagna said creditors had got their sums wrong. Taking into account the growth-linked bond, he said, the write-off would be "about 75 per cent in net-present-value terms, and 75 is not the same as 92. They [the bondholders] can say they don't like it, but they cannot make calculations based on incorrect assumptions".

These are difficult times for Argentina. The country is awaiting approval from the International Monetary Fund that would release the second tranche of funds under its current three-year programme. The country desperately needs the money to help cover a $3.1bn payment it must make to the Fund by Tuesday, and President Néstor Kirchner has said the country will not pay without a prior signal that approval is forthcoming.

On Wednesday, the fund's board began an informal meeting to decide whether Argentina was making good faith efforts to reach an agreement with its creditors - the main issue that could frustrate a quick approval.

Mr Lavagna refused to comment on the threatened default, but said: "Argentina has met all the targets. The mood of the meetings has been very positive, there is a draft text over which we are completely in agreement and now it is down to a political decision of the Fund's shareholders. As far as I am concerned there is only one decision to take, but I am not the G7."

He also played down the significance of the decision this week by the Global Committee of Argentina Bondholders (GCAB), by far the biggest of the private creditor organisations, to withdraw from the government's consultative groups. The government hoped the groups would become the main vehicle for talking with investors.

"In Spanish, there is a saying that he who goes without being asked to leave returns without being called. That often happens."

Yet he did admit his surprise. According to Mr Lavagna, the organisation informed him as recently as February 18 that it would take part in the groups. "They are moving targets. If in the space of 15 days they go from a desire to participate to the opposite, then I don't know what to make of it."

He added: "I hope that in a month and a half [when Argentina has said it would reveal the details of the Dubai offer] we can meet with all the consultative groups. We have invited 21 groups, among them GCAB, of course, and I hope we can sit down and discuss all the details of the offer."

But he warned that there would be no improvement in the offer. "The G7 made a specific request, which Argentina accepted, that there would be a net payment of credits to the multilateral agencies, and in the last 22 months we have paid a net $7bn to the agencies."

That fact, he said, meant there would be less for the private sector. "It is not a political problem; it is not blackmail or any other stupidity being bandied around. It is just a question of mathematics."

Source: Financial Times