MercoPress. South Atlantic News Agency

Argentine government negotiating creditors' counteroffers ahead of Friday deadline

The government has set a Friday deadline for a deal, when it faces US$ 500 million in interest payments that if missed could trigger a default.

Argentina’s government and its creditors are edging toward a deal to revamp US$ 65 billion in foreign debt but still have a distance to close between an initial offer from the government and counteroffers from bondholders ahead of a Friday deadline.

The progress has buoyed Argentine bonds, which rose over 10% last week and were up again on Monday. The government has set a Friday deadline for a deal, when it faces US$ 500 million in interest payments that if missed could trigger a default.

Argentina’s creditors made counteroffers late last week after rejecting an initial proposal from the government involving a three-year payment halt, a 62% cut to coupon payments and maturities pushed to 2030 and beyond.

However, more work needs to be done, with Argentina’s government steadfast that any deal needs to meet its own analysis of what would be sustainable, as well as one by major lender the International Monetary Fund.

“The counterproposals represent progress. But the two sides remain meters, not centimeters, away from what could work,” a source of the negotiations with creditors said. “If you take their offer at face value it is not only beyond what the government would find acceptable but is beyond what would work in an IMF framework as well.”

The counteroffers from major creditor groups call for a shorter one-year grace period on payments and higher average interest rates than the government’s initial proposal

The progress has though helped lower Argentina’s risk index. Spreads over safe-haven U.S. Treasuries closed 144 basis points lower on Monday, and bond prices rose 3.3% as the government mulled the counteroffers from creditors.

Talks may also go on beyond Friday’s deadline as the recession-hit country looks to defuse the debt crisis and revive its economy, even as the major grains producer is simultaneously being sideswiped by the coronavirus pandemic.

Apparently the government’s restructuring offer came in at about 40 cents on the dollar and the counter-offers were just under 60 cents on the dollar.

Argentine bonds are already trading at distressed levels mostly between around 30-35 cents on the dollar after a sharp fall last year as fears rose about a potential sovereign default, which would be the country’s ninth.