MercoPress. South Atlantic News Agency

Argentina open to proposals from bondholders: default deadline stands at 22 May

Argentina faces a race to restructure what it says is an “unsustainable” debt pile and avoid slipping into a ninth sovereign default

Argentina will keep pushing for talks with creditors even as a deadline for its US$ 65 billion debt restructuring proposal passed on Friday with little sign it had the support needed from international bondholders to unlock a comprehensive deal. Apparently on averaged less than 20% of bondholders accepted Argentina's conditions

Economy Minister Martin Guzman announced on Friday that Argentina “remains open to dialogue” and that it would reassess its position after the deadline, which expired at 6 p.m. (2100 GMT) in Buenos Aires.

Argentina faces a race to restructure what it says is an “unsustainable” debt pile and avoid slipping into a ninth sovereign default that would revive memories of an acrimonious decade-long standoff with creditors after a default in 2001-02.

“We will assess the situation after the offer expires today and we will continue working to achieve the goal of restoring debt sustainability to put the county back on its feet,” Guzman said.

If creditors have ideas that suit them better while respecting the constraints that Argentina faces, then “we are ready to listen”, Guzman added.

“Any combination of interest or principal reduction, grace period, and extension of maturities that is aligned with the debt sustainability analyses of Argentina’s government and the IMF will be considered.”

However in practical terms this means a window of fifteen days remains open, that is until May 22, when Argentina is scheduled to make a US$ 500 million payment.

Major bondholder groups have balked at Argentina’s proposal to impose big cuts in coupon payments, allow a three-year payment hiatus, and push back maturities into the next decade. The offer was unveiled in the middle of last month.

Guzman indicated to local media that the country would announce the next steps in the process on Saturday. On Saturday he is scheduled to share breakfast with president Alberto Fernandez.

The bond revamp is part of a broad restructuring with creditors, including major backer the International Monetary Fund and the Paris Club of country-to-country lenders.

The government says its ability to pay creditors is extremely limited as Argentina was already in recession before going into lockdown due to the coronavirus pandemic on March 20. Since then the economy has shriveled.

“The market is pessimistic about the chances of a deal being reached today,” said Gabriel Zelpo, director of Buenos Aires economic consultancy Seido.

On both sides of the talks, officials and creditors indicated there was unlikely to be a quick resolution, but there was hope a deal could eventually be struck.

“There’s still time for these negotiations that are ongoing,” IMF Managing Director Kristalina Georgieva said on Friday, adding it appeared Argentina recognized “it is important to find a pathway to resolve their debt crisis.”

Oxford Economics said that the current offer was likely to be rejected, raising the risk of non-payment. “Yet, we expect negotiations to continue and a disorderly default to be avoided as the government remains open to counterproposals,” it said.

Argentine country risk as measured by JP Morgan’s Emerging Markets Bond Index Plus 11EMJ was virtually unchanged when the market opened on Friday, at 3,318 basis points over safe-haven U.S. Treasury bonds. The country’s bonds have edged up in recent days, but are still at distressed levels between 20-35 cents on the dollar.