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Montevideo, October 31st 2020 - 02:01 UTC

 

 

Argentina extends debt negotiations deadline to “increase participation” and “better alternatives”

Tuesday, May 12th 2020 - 09:00 UTC
Full article 4 comments
Argentina's Economy Ministry said in the gazette that it had extended the deadline to “increase participation” after taking stock of the current offer Argentina's Economy Ministry said in the gazette that it had extended the deadline to “increase participation” after taking stock of the current offer

Argentina will extend negotiations over a US$ 65bn debt restructuring proposal until May 22, the government said in the official gazette on Monday. The extension sets the stage for tense last-ditch talks as Argentina races to avoid default.

The new deadline, which comes after an initial deadeline passed on Friday without the support needed for a comprehensive deal, means the offer will expire the same day Argentina could trigger default over a US$ 500m interest payment.

Argentina is racing to revamp unsustainable debts amid a painful recession, high inflation, and increasingly expensive borrowing costs as concerns over a potential ninth sovereign default have rattled investors and hit bond prices.

The talks so far have not been simple, with three major creditor groups rejecting the initial proposal and pushing for improved terms. Argentine officials have said the country cannot afford to pay more, though they are open to counterproposals.

“Clearly, both sides are playing hardball,” Capital Economics said in a note on Monday, adding that the talks were likely to drag on and that creditors could face large haircuts, especially with the global coronavirus pandemic sapping growth.

“The government is facing ever-growing demands on its purse as the health crisis continues,” it said. “Accordingly, recovery rates for foreign bondholders of around 30 percent are looking increasingly likely.”

Analysts calculate that the current offer - which includes a three-year payment halt, a large cut to coupon payments and maturities pushed back to 2030 and beyond - amounts to a net present value of around 30 to 35 percent. Bondholders say this needs to be raised to gain support.

Argentina's Economy Ministry said in the gazette that it had extended the deadline to “increase participation” after taking stock of the current offer. The government has not said what exact level of support that offer garnered.

“While many of our bondholders supported Argentina's invitation, other significant groups of creditors did not,” the ministry said in a statement, adding that the government remained open to discussing the way forward.

“Among those that rejected Argentina's offer, several have indicated that there are better alternatives that can be reconciled with the objectives that this administration has set for itself and the Argentine people.”

The invitation closes on May 22 at 5pm New York time (21:00 GMT). The results of the offer will be announced around May 25 with a settlement date of May 27.

The bonds in question include collective action clauses, which means the government needs to meet a threshold of investor support to move ahead with comprehensive restructuring.

Argentina's bonds, which have fallen steeply since the middle of last year, are already trading at distressed levels, with most around 25 to 30 cents on the dollar.

Goldman Sachs said in a note that without a deal, it was likely Argentina would default on May 22, though it did not rule out payment if a deal looked close at hand. The investment bank noted the signs were that participation had been low.

“The absence of specific official information suggests that the initial acceptance rate may have been quite low,” it said.

The country's largest province, Buenos Aires, is facing a separate debt crisis of its own, with an offer to holders of its foreign law bonds to restructure around US$ 7bn in debt due to expire later on Monday.

A major creditor group has already rejected the proposal from the province, which also faces bond repayments on Monday. Missing those payments could trigger a local government default.

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  • Marti Llazo

    ' . to “increase participation” and “better alternatives”.... '

    -- Because everyone knows that Argentina's offer was roundly rejected as absurd, insulting, and insincere. And in that respect, characteristically argentine.

    May 13th, 2020 - 06:08 pm 0
  • Enrique Massot

    ML

    It is nothing but bizarre that our distinguished commentator keeps blaming Argentina for attempting to renegotiate its foreign debt.

    ML would probably prefer former president Mauricio Macri -- who was ready to sell the country for peanuts -- so that the bondholders could be rewarded, as it happened with the vultures of the finance at the beginning of his term in office who got more than what they were asking.

    Instead, after getting rid of a clearly inept president, Argentina has given itself tough negotiators who put the country and its population first -- something that deeply displeases ML, who betrays a hostile interest expressed by angry postings in MP's friendly environment.

    Not only is economy minister Martin Guzman attempting to spare Argentina from deep penury -- he has offered creditors a reasonable offer with which they won't lose money -- they will just earn a bit less.

    This fact is what has prevented ML from having a good sleep night for the last five months.

    May 14th, 2020 - 03:05 pm 0
  • Marti Llazo

    Mister Reeky fails to understand the degree of deficit spending and outright indebtedness that the Macri government inherited, including the many judgments against the country which the KK governments refused to even acknowledge. But you wouldn't understand such things, would you, Reeky?

    Here's a hint, and one-- just one -- example: the Macri government ended up taking on debt to pay a hedge funds judgment against the Kirchner government of about US$6.5 billion, most of which had been accumulated --- wait--- by the Kirchner governments, which had spend some US$40 million contesting rather than paying. The Macri government negotiated a settlement of US$4.7 billion, which the parties considered to be reasonable, unlike the laughably insincere cram-down theft tactics of the KK governments. So of course they had to borrow money to pay for that. A number of similar debts had also taken place during the KK governments which of course Reeky and similar minions failed to even acknowledge. Don't wish to believe there is debt and it just disappears, right?

    Argentina's chief criminal Guzman and company haven't indicated how Argentina is going to change in such a way as to be able to pay anything, and the country right now is headed for a decade of recession and continuing deeper default as a result. What they have been proposing instead is outright theft disguised as an offer, and the creditors aren't taking it. Some 80 percent of the creditors' representatives can see right through the Peronist silliness and have rejected Argentina's laughably insincere offer.

    May 14th, 2020 - 10:18 pm 0
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