Monday, December 4, 2023

ECONOMY | 18-06-2020 02:19

Creditors' group issues court threat as debt talks hit a wall

Talks seemed to have hit a wall, with one government source saying it was "highly unlikely" a deal will be agreed before Friday's deadline.

One of the main groups of bondholders involved in the government's bid to restructure more than US$65 billion in foreign debt says it is evaluating whether to seek repayment in the courts, describing negotiations with the government as "a failure."

Talks seemed to have stalled with one government source saying it was "highly unlikely" a deal will be agreed before Friday's deadline.

Speaking in a TV interview on Wednesday night, President Alberto Fernández said he was "inflexible" on his insistence that any deal for Argentina must be "sustainable."

The Ad Hoc Bondholder Group, one of several that have been most active in the talks, hinted that its patience was running out.

"Given the failure of the bondholder negotiations, our group is now considering all available rights and remedies in our capacity as fiduciaries to the millions of savers we serve around the world,” said a statement published early Thursday morning.

"Although we made additional improvements to the proposal, the authorities have chosen to remain in default, increasing the risks of economic deterioration in an economy that has an urgent need for new investments and access to international capital markets," said the group.

The government hoped to seal a deal by this Friday's deadline, after presenting a "final offer" last Tuesday. However, both sides still have differences.

"We are going to pay as much as we can, not a millimetre more. And in that I am inflexible, because I know how the world of finance is. They cannot demand from Argentina what the world does not require," the president warned.

According to a report in Ambito Financiero, the Peronist leader has ordered negotiators not to move from Argentina's current position. 

Those conducting the negotiations "cannot comprehend that our country can't go higher right now that it has already offered up to now," a source in the Economy Ministry told the newspaper. "There exists an order from the president to not go higher that what we have offered."

'Highly unlikely'

A government source, speaking anonymously to the AFP news agency, said that Argentina would not present a new formal offer because "the distance with some bondholders is still unsustainable."

"It is highly unlikely that (an agreement) will be resolved before [the deadline on] Friday," the source said.

Negotiations were continuing under a confidentiality agreement, but that commitment expired on Wednesday afternoon and was not renewed, AFP reported.

On Wednesday night, in its own statement, the Economy Ministry released a new proposal, though it stressed it was not yet a formal offer. It suggested reducing the grace-year-period for payments by another year, to begin paying in 2021, while reducing the cut on capital and shortening the time period on maturities.

According to local reports, BlackRock, one of the main holders of Argentine debt, is the most intransigent of the funds.

"There are many groups of bondholders who are beginning to indicate that BlackRock is more eager to litigate [before the New York Justice system] than to agree [a deal]," said a government source quoted by AFP.

Argentina has been in default since May 22, after it missed payments of US$500-million on interest on three bonds subject to the debt swap proposal. 

The government is now said to be proposing a bond recovery rate of no more than 50 cents on the dollar, while throwing in a "sweetener" – a coupon tied to agricultural exports, according to sources close to the talks. Ambito reported Thursday that BlackRock is seeking at least 55 cents on the dollar.

According to the statement issued by creditors, the gap between the proposals is 0.3 percent of Argentine GDP for a year.



More in (in spanish)