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ECONOMY | 04-04-2020 09:29

Debt restructuring talks with creditors delayed, but offer is coming

Economy Minister Guzmán admits coronavirus pandemic has complicated talks, but says government will deliver an offer “very quickly,” most likely in the coming week.

Talks over the restructuring of more than US$68 billion in foreign debt have been delayed, but talks will continue this and next, Economy Minister Martín Guzmán declared this week.

The government is looking to present an offer at some point after that, the minister said at a press conference. He declined to comment on drafts of the offer or whether certain bonds will receive differential treatment.

The government authorised the opening of restructuring talks on March 10 and it intended to present an offer to creditors this week. The schedule, however, has been thrown off by the global coronavirus pandemic.

“We have had a slight delay to the formal offer,” said Guzmán at a press conference this week, who said it would be in line with International Monetary Fund (IMF) recommendations.

“We’re looking to launch an offer very quickly,” he said. “We’re working with urgency to reach a successful exchange.”

The minister said that he was “dialoguing constructively with bondholders” but that “it is not possible [to define] a precise date” for the offer for now.

Guzmán said that his team was “paying a lot of attention to the debt sustainability analysis made by the IMF,” which Argentina owes US$44 billion. On March 20, IMF Managing Director Kristalina Georgieva said that “substantial relief [from] from private creditors will be necessary to restore [the] sustainability” of the country’s debt. According to reporting by TN, the IMF has recommended no payments at all for five years.

The government is analysing a proposal with “multiple combinations” of grace periods, coupon reductions, expiration extensions and other options, the minister told reporters.

The Economy Ministry later released a document entitled “Guidelines for debt sustainability,” in which it declared that public debt “is in an unsustainable position,” blaming the “excessively high” cost of refinancing.

“An adjustment in the terms of public debt is required, with a balance of eligible debt to be restructured amounting to US$83 billion. This constitutes only a part of total public debt but restoring its sustainability constitutes a critical need in the resolution of the Argentine economic crisis,” it said.

It outlined five key issues for talks, including a grace period for foreign debt, coupon reductions (which must be “substantially reduced” according to the document), payment limits (extensions of maturities or possible reductions in the value of debt), recovery options (i.e. paying extra should the economy reboot quicker than expected) and exit yield (estimated return).

According to reports on Thursday, officials are at odds with international bondholders over a proposal for a four-year moratorium on payments to creditors.

Economy Ministry officials have told investors that the country will not be able to make any interest payments, let alone repay capital, until sometime in 2024, according to people knowledgeable about the talks.

Many bondholders want payments to begin in 2021, unnamed sources told Bloomberg, who asked that their identities not be revealed because the talks are confidential.

A spokesman for the Economy Ministry refused to comment.

Argentina’s total debt amounts to around US$311 billion, the equivalent to 90 percent of its GDP, according to the AFP news agency.

– TIMES/AFP/BLOOMBERG

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