A recent series of conversations between bondholders and government officials have converged towards that date as the moment of truth for avoiding default, according to sources privy to those meetings.
Restructuring talks could stretch to the end of May or even several months in a context of global crisis and coronavirus, according to other sources.
Furthermore, there are fears that continually plunging bond values will eventually place them in the hands of the holdouts – more commonly known in Argentina as the los fondos buitre, or “vulture funds.”
A payment of US$ 1.9 billion to the Paris Club will also be falling due in May but the government is confident that an extension can be negotiated, Bloomberg reported.
Although the dollar-denominated Bonar 2024 bonds were sold under local law, thus making it easier to extend their May 7 deadline unilaterally, renewed reprofiling would send a negative signal to creditors hoping to reach an agreement to restructure approximately US$ 69 billion in foreign bonds, even at cut prices.
Both President Alberto Fernández and Economy Minister Martín Guzmán have admitted that the conversations will extend beyond the original March 31 deadline with the coronavirus pandemic only adding to the delays in the roadshow to explain the offer to creditors (which will probably now have to proceed via teleconference).
“A series of payments falls due in April but it’s also true that we can extend them for 30 days. We fixed March 31 to give ourselves time in case the timetable ran into delays at some point,” admitted Fernández in an interview with FM Delta this week.
For his part Guzmán said: “We must all be more flexible in the framework of this global crisis.”
There was no official comment from the Economy Ministry.
According to Patrick Esteruelas, the chief researcher at the New York-based Emso Asset Management, the March 31 deadline was always “pure science fiction.”
“Argentina has an enormous stock of debt in many different hands,” he told Bloomberg.
While needing to elaborate a credible restructuring plan for creditors in order to avoid a total default, Argentine must at the same time negotiate arrears in payment to the International Monetary Fund but has yet to publish details although it has contracted banks for advisory purposes.
Alejo Costa, a strategist at BTG Pactual, observes that total default now seems to be the “scenario of reference” for his clients.
Total payments of US$14.8 billion under both local and foreign law will fall due to bondholders in the rest of this year, according to 1816 Economía y Estrategia local consultants. This figure excludes all peso debt.
Both this month and next will present less difficulties with payments of US$235 million and US$644 million falling due respectively while Central Bank reserves amount to US$44.8 billion (approximately US$13.4 billion in net reserves according to Eco Go consultants).
“Although Argentina has selfimposed capital controls, the net reserves are low,” said Eco Go executive director Marina Dal Poggetto, with the government “unable to delay debt negotiations for long.”
NOT FOR LONG
Guzmán has likewise said that some reserves can be assigned to paying off interest but not for long.
Argentina will have to pay interest on three dollar-denominated bonds governed by New York law on April 22 but the only capital payment under foreign law falling due this year will be in October with a global bond in Swiss francs to the tune of US$432 million, according to data compiled by Bloomberg.
Even if no official proposal has yet come through, the IMF has signalled that it would support a plan with a significant haircut. On February 19 the I M F d e f i n e d Argentina’s debt as “unsustainable,” calling on private creditors to make a “significant contribution.”
“It’s not crucial to have an agreement with the IMF ahead of an agreement with the private creditors but I think it helps,” said Esteruelas. “Fernández inherited important debt without credibility in market eyes and that credibility is extremely difficult to create.”
With huge sums of money being lost elsewhere, Argentina’s massive debt is losing its protagonism on international markets. The sharply reduced prospects for the Argentine growth which the government makes a precondition for debt repayment also work against an aggressive bond swap, as does growing creditor risk aversion.