August 9, 2020

Negotiation of Argentine debt enters decisive phase before the 22-M deadline

Argentina’s arduous negotiations with private creditors to restructure bonds for $ 66,239 million this week enter a definition phase as two crucial deadlines for this process expire on Friday the 22nd.

March 22 is the deadline for holders of Argentine foreign law bonds to give their consent to the restructuring proposal launched by the South American country almost a month ago.

Also on Friday, the thirty-day grace period that Argentina accepted when it did not pay an interest maturity of $ 500 million on three bonds included in the exchange offer expires.

If by that day Argentina does not reach an agreement with creditors and does not regularize the payment of that commitment, the country would enter into a selective cessation of payments.


The proposal presented by Argentina on April 22 includes a three-year grace period, that is, to start paying newly in 2023 coupons with an initial rate of 0.5%, which would gradually increase to an average interest rate of 2.33 % and a maximum rate of 4.875%.

It also implies a deduction of 5.4% on the owed stock and 62% on the interest.

The offer was flatly rejected by various groups of creditors led by powerful investment funds such as Blackrock, Fideliity, Ashmore, Monarch and Gramercy.

The initial term of adherence to the offer expired on May 8, but the Argentine Government decided to extend it until 22 due to a level of acceptance whose percentage was not officially reported but which, according to market sources, was around 15% and twenty %.


Late last Friday, the Government of Alberto Fernández confirmed the receipt of three counter-offers, but did not give details of their content or specify who presented them.

Two of the committees that bring together Argentine bondholders have confirmed that they have submitted counterproposals.

One of them is the so-called Group of Exchange Bond Holders stated, made up of 18 funds that claim to have 15% of the bonds issued by Argentna in the exchanges of 2005 and 2010.

The other is the Argentine Creditors Committee, which presented together with the Gramercy and Fintech Advisory funds a counteroffer for the restructuring of Argentine bonds issued after 2016.

Both counter-proposals, as confirmed by the two groups, were “coordinated” and “represent a good faith effort by these groups to provide a consistent basis for expedited restructuring” of Argentine foreign-law bonds and “a sustainable debt profile long-term”.

According to these two sets of creditors, their proposals respect both the principles of the bondholders and the “current economic conditions” of Argentina, whose economy was in recession two years ago.

In both cases, they assured that the terms included in their counteroffers – which they did not make public – will allow the South American country a “substantial relief of ‘cash flow’ (cash flow) through a combination of deferral of interest payments, decreases in coupon payments and deferment of amortization payments. ”


After receiving the counter-offers, the Argentine Government said that the Minister of Economy, Martín Guzmán, together with his team and the financial advisers hired by the South American country for this process, will analyze the characteristics of these proposals and “their implications for the objective of restoring the sustainability of public debt. ”

“The Argentine government and the Republic’s creditors continue constructive dialogue in order to reach a sustainable agreement in the process of restructuring the external public debt,” the economy ministry said in a statement on Friday.

In an interview published this Sunday by the information portal Cenital, Guzmán affirmed that “a dialogue is taking place” with creditors that “is going the desirable way” and assured that the Government is “open to listen to ideas”.

“We are optimistic and we know that we are working, seeking to appeal to the collaboration between all parties so that there is an agreement that is sustainable,” said the minister.


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