Argentina has announced an improved offer to holders of external debt of $ 65 billion, hoping to break a deadlock that has persisted since it defaulted in May.
The latest offer, Argentina’s fourth since talks began earlier this year, would increase interest payments and reduce losses on bondholders’ initial investments, as well as shorten the maturities of new bonds.
In a radio interview on Sunday, President Alberto Fernández described the offer as the “maximum effort” that Argentina could make.
A person close to the government negotiations said there is “zero chance of any amendment,” noting that “we have reached a point where there is something else and we prefer not to have it.”
“This is final,” added the person. “If we give more, it is very, very doubtful that it can be sustainable, so it would damage the credibility of what we are doing.”
The improved terms suggest a recovery value of approximately 53 cents on the dollar, according to analysts, an increase of approximately 40 cents on the recovery value in dollars of a previous proposal.
Interest payments on new bonds to be exchanged for old debt will begin in 2021, one year earlier than in the last government offering, and will mature until 2046. Bondholders issued in 2005 will be able to maintain their legal protections more Strong, and accrued interest will be covered by a bond maturing in 2030. Creditors have until August 4 to accept the terms.
A successful deal depends on the support of the two largest groups of bondholders, which comprise bondholders issued after 2016 and so-called previously restructured exchange bonds issued in 2005 and 2010. Older bonds require an approval fee. higher for a successful restructuring.
Together, the two groups, which include BlackRock, Fidelity, T Rowe Price, VR Capital Group and Monarch Alternative Capital, could block a deal as they own 35 percent of the total outstanding bonds.
A bondholder in one of the larger groups said he doubted the offer would attract enough creditor support. But another said the government’s offer was an “encouraging” signal, stating that the two sides “are not far behind now” in terms.
Robert Koenigsberger, chief investment officer at Gramercy Funds Management, encouraged the other bondholders to accept the improved offer. “Does [a creditor] Want to be a holdout in the Covid-19 era for a couple of points? “, said.
Siobhan Morden, Latin American fixed income chief for broker Amherst Pierpont, said it was a “high-risk strategy” for the government to act without the explicit backing of those groups. But she believes there will be significant pressure for creditors to accept a proposal that is considered a “considerable improvement from where Argentina started a few months ago.”
The talks had been close to collapse and last Tuesday, the two largest groups complained of a “serious lack of commitment” by Argentine authorities, saying there had been no significant talks since June 17.
The IMF, which loaned $ 44 billion to Fernández’s predecessor, Mauricio Macri, in a failed attempt to stabilize the economy, has so far backed Fernández. He has published an analysis that suggests that Argentina’s debt burden is unsustainable and that it cannot pay creditors much more than it currently offers.
Argentina’s non-compliance in May was the ninth in the country’s history and occurs during one of the longest and strictest blockades in the world to combat the coronavirus.
