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ECONOMY | 26-11-2019 13:24

Alberto Fernández planning simultaneous debt talk with IMF and private bondholders

President-elect's team believes holding simultaneous debt negotiations with private bondholders and the IMF will smooth the way for a better deal.

President-elect Alberto Fernández plans to hold debt negotiations with private bondholders and the International Monetary Fund (IMF) at the same time as part of a strategy to obtain a better deal, according to a person with direct knowledge of the matter.

Fernández’s incoming government considers that holding simultaneous, yet separate, talks is likely to give Argentina more bargaining power, as well as the ability to adjust proposals on both ends, the person said.

The negotiations are set to begin after Fernandez takes office December 10, said the person, who asked not to be identified because the plans are not yet public.

The talks come after an August bond rout and a devaluation made the country’s debt load even harder to meet. The current government of Mauricio Macri said it would seek to push out maturities on as much as US$101 billion of debt, including payouts from a record loan from the International Monetary Fund.

Credit-default swaps imply a 96 percent probability of non-payment in the next five years, with most sovereign bonds trading around 40 cents on the dollar.

Fernández has said he doesn’t want to default on debt, but can’t meet obligations under current conditions.

The Frente de Todos, who won the presidency in a first round in October, held his first call with new IMF Managing Director Kristalina Georgieva last week and told her that he has a plan to grow the economy and tackle the nation’s debt but that he won’t impose more austerity measures on the population.

Georgieva said in a Bloomberg interview that “the government has to figure out a way to live within budgetary constraints,” and “they will have to bring debt to a sustainable level so they can return to markets.”

A spokesman from the International Monetary Fund declined to comment. A spokesman for Fernández did not reply to a comment request.

During the campaign, Fernández backed the idea of extending private debt maturities in the style of Uruguay’s 2003 restructuring plan, but he later acknowledge that Argentina’s debt dynamic is different.

Amid the uncertainty, at least four groups are recruiting Argentina bondholders to join their alliances as investors. The committees are forming with the goal of also trying to gain more bargaining power with Argentina’s next administration.

Fernández has not yet named his economic team. A spokesman confirmed local reports that he plans to announce his Cabinet on December 6.

by Jorgelina do Rosario, Bloomberg

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