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ECONOMY | 04-07-2020 09:06

Casa Rosada dismisses rumours of Guzman’s departure

BlackRock, other creditors, big businessmen and ministers are questioning the economy minister’s approach to debt restructuring talks, but Guzmán retains the confidence of Alberto Fernández and Cristina Fernández de Kirchner.

After a day of rumours, officials inside the Casa Rosada on Friday immediately dismissed reports that Economy Minister Martín Guzmán would be leaving his post.

“Who said such stupidity?" one senior official inside Government House told Noticias on Friday, when quizzed about the rumours.

Nevertheless, the rapid pace at which the reports swept across Argentina on Friday underlines the pressure on the economy minister, who is seeking to renegotiate more than US$66 billion of foreign debt. 

According to local outlets, the fact that negotiations have dragged on for three months are sparking concern among some government officials. Perfil reported Friday that a group of local business leaders, along with at least three serving politicians, had met on Thursday and later proposed the idea of a more experienced figure taking over the debt talks. Potential names floated include Roberto Lavagna, Carlos Melconíán and Sergio Palazzo.

In recent weeks, Guzmán has come under fierce fire from private creditors too. At BlackRock, the world's leading investment fund and a high holder of Argentine debt, they are said to loathe the minister, who they feel is too based in academia and removed from frontline politics. 

Temperatures sparked again this week when creditors broke ground to once again criticise the government. Two of the main three groups slammed the government’s “lack of serious commitment” to negotiations, declaring that there had been “no significant advance” in talks since June 17.

The original deadline for talks to close was in March, but the government has extended the cut-off almost every two weeks. Its initial offer, presented May 8, was rejected by most creditors.

Argentina fell into default on May 22, after missing interest payments worth US$500 million on three bonds subject to the swap.

‘Lock-up offer’

Some bondholders said this week they would reject an attempt by the government to move forward with a debt restructuring deal that it has been negotiating with another set of creditors.

The Ad Hoc and Exchange Bondholder groups, which include BlackRock Inc, Ashmore Group Plc and Monarch Alternative Capital LP, are closely watching to see if the government submits an offer that it has discussed with a third creditor group – the Argentina Creditor Committee – and would reject it, said the people, who asked not to be named because the talks are private. A so-called “lock-up” agreement is being discussed by the two groups, which would bind their members to reject that offer, some of the people said.

Debt talks have broken down in recent weeks with little progress in agreeing how to restructure some US$65 billion in bonds by the latest deadline of July 24.

Without the support of these two key groups, any restructuring would likely leave a large amount of holdouts and increase the risk of litigation.

The Argentina Creditor Committee, or ACC, submitted a revised debt proposal on July 1 to government officials that would provide US$39 billion in debt relief over the next 10 years. If the next Argentine proposal is the one submitted by the ACC, the Ad Hoc group wouldn’t support it, according to people familiar with their thinking.

The ACC counter-proposal suggests that bond payments begin July 2021, and that bonds are paid out in January and July instead of May and November, according to a document obtained by Bloomberg. The document also proposes keeping the bond terms from 2005 only for holders of bonds issued in the country’s previous exchanges, a point that the Ad Hoc and Exchange groups have opposed.

The two large creditor groups have publicly said that they hold approximately US$21 billion of Argentine bonds, including 32 percent of bonds issued after the 2005 debt exchange. The ACC hasn’t publicly disclosed how much it holds. Securities issued under the 2005 bond contracts require sign-off from at least 85 percent of bondholders in a restructuring to avoid holdouts, versus the two-thirds or 75 percent threshold on securities issued more recently.

Guzmán said on June 25 that he was making progress with the Argentina Creditor Committee, or ACC, and that he remains open to discussions with the Ad Hoc group.

Argentina is looking to present its final offer by July 24, according to a statement sent on behalf of the government Wednesday evening. The government added that it had found that creditors’ written proposals did not reflect verbal agreements made during the talks, and because of that it had chosen not to renew confidentiality agreements upon their expiration.


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