The government has unveiled the details of its latest proposal to restructure US$65 billion of foreign bonds and extended the deadline for talks until August 4.
The proposal seeks to reduce creditor losses on the bonds’ principal, increase coupons and shorten bond maturities, according to a release published Sunday evening. The latest proposal will include minimum participation thresholds as a condition to go forward, according to the release, without disclosing the percentages needed.
The government's debt talks have stumbled in recent weeks, with little progress and limited communication with some of the nation’s largest creditors. Argentina, which defaulted for the ninth time in history in May, has repeatedly extended the deadline to reach a deal and until Sunday, had set July 24 as the next key date. Given that the country is already in default, the deadlines aren’t binding.
“We’ve done our part, based on our full commitment to put a final end to the debt crisis in a sustainable way,” said Economy Minister Martín Guzmán in an emailed statement. “We hope our creditors can understand the restrictions we have, and they value our will to reach a deal that works for all parts.”
Argentina’s latest offer will pay accrued interest via a dollar and euro bond due 2030, and will allow holders of bonds issued under the 2005 indentures to receive new bonds maintaining the same contracts. The offer will let holders of euro and swiss franc-denominated eligible bonds choose dollar-denominated bonds.
The proposal unveiled Sunday would begin making capital payments in March 2025 and set semi-annual coupons, with payments in March and September of each year, beginning September 2021. That’s earlier than a prior offer formally presented in April, which suggested interest payments begin in 2023. The latest proposal also suggests step-up coupons, beginning at 0.125 percent next year, with some bonds eventually paying investors five percent annually.
“The government has made a substantial improvement relative to the first offer introduced by mid-April,” according to Ramiro Blazquez, head of research and strategy at BancTrust & Co. in Buenos Aires.
With the latest extension, “the government has decided to continue playing the chicken game based on the notion –probably nurtured by Guzmán – that creditors also stand much to lose from a messy default.”
The offer also proposes to swap existing bonds for dollar and euro bonds maturing in 2030, 2035, 2038, 2041 and 2046. It did not include a sweetener, also known as a value recovery instrument. Prior proposals from the government and creditors made public in June had suggested adding a sweetener tied to either exports or gross domestic product.
“The inclusion of a value recovery instrument could be the government’s ace under the sleeve to eventually unlock negotiations and increase the value of the offer further without compromising debt sustainability,” Blazquez added.
The government will also submit a bill to Congress in the coming days to restructure its local-law, foreign currency debt. The bill will propose giving holders of local-law dollar debt the same conditions that it has offered creditors of overseas debt in its latest offer.
President Alberto Fernández had said earlier Sunday that the government would make public a new offer to creditors.
“The offer will be revealed today,” Fernández said in an interview with local radio. “We have made a huge effort to keep our word. This is the maximum effort that we can make.” He said the new offer would be open until the end of August.
Last week, one group of bondholders, the Argentina Creditor Committee, presented a proposal to the government. But two other groups of creditors are discussing an agreement to reject a new government offer based on that proposal, according to people familiar with the discussions.
Those two groups, which include major firms such as BlackRock Inc, Ashmore Group Plc and Monarch Alternative Capital LP, said last week they hadn’t had meaningful discussions with the government since June 17.