Bondholders and government officials trade barbs on debt plan

The clash between Argentina’s largest creditors and the nation’s Ivy League-educated economy minister is going down to the wire.

With an initial deadline for an accord looming on Friday, both sides are digging in. On Monday, the country’s three biggest bondholder groups said in a statement that they can’t support the initial US$65-billion debt-exchange proposal because it forces them to “bear disproportionate losses that are neither justified nor necessary.” A day earlier, Economy Minister Martín Guzmán wrote in an op-ed for the Financial Times that Argentina can’t afford to pay creditors more.

“The time for illusions is over,” he said. “In the new Covid-19 world, we cannot continue to spend 20 percent of government revenues or more on debt payments — as some creditors have effectively asked. It is simply impossible.”

Creditors have criticised Guzmán for taking an academic approach to the debt deal that’s out of touch with the market. The 37-year-old minister earned a PhD from Brown University and is close to Columbia University professors Jeffrey Sachs and Joseph Stiglitz. Meantime, government officials have blamed bondholders for stubbornly insisting on more favourable terms that will leave the nation even worse off, especially in the midst of a pandemic.

Last week, most of the nation’s biggest creditors refused to attend video calls with Guzmán, citing his lack of flexibility with the offer. This afternoon, Argentina’s Exchange Bondholder Group will host a webinar to explain why it believes investors should reject the deal.

Still, key creditors believe there may be some flexibility on terms as discussions continue, according to people with direct knowledge of the matter, who declined to be named because the talks are private.

Siobhan Morden, the New York-based head of Latin America fixed income strategy at Amherst Pierpont Securities, said the base case is the debt exchange proceeds with minority participation, setting the stage for another legal showdown.