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ECONOMY | 18-07-2020 09:50

Government offers bond exchange, sends debt bill to Congress

Guzmán says Argentina is not seeking a "confrontational" relationship with foreign creditors and says onus is now on them to make a deal.

The government is fulfilling its promise to treat local and foreign bondholders in the same way as it restructures its debt.

The government, which is hoping to seal a deal to restructure more than US$66 billion in debt with foreign creditors by August 4, sent a bill to Congress on Thursday to restructure debt issued under local law, which proposes endowing the Economy Ministry with the authority to arrange a bond swap under equal or equivalent conditions to creditors under foreign jurisdiction.  Bondholders not adhering to this bond swap may do so further down the road on the understanding that they forfeit interest payments falling due after April 5, 2020, according to the third article of the bill.

This bill under the heading of "Restoration of the Sustainability of Public Debt," consisting of eight articles plus an appendix detailing the bonds on offer, is considered one of the government’s top parliamentary priorities alongside the universal tax moratorium. 

 

Swaps

Meanwhile, the Treasury yesterday offered investors a narrow 10am to 3pm window to swap dollar-denominated bonds and some local bonds for an index-linked basket in pesos.

Friday’s swap of dollar-denominated bonds issued under Argentine legislation in exchange for index-linked bonds denominated in pesos, as governed by this year’s decrees 141 and 193, is based on parameters similar to earlier operations involving Dual bonds (AF20) and Treasury bills (Letes).


The Economy Ministry is offering a basket of Boncer bonds, so-called because they are index-linked according to CER (Coeficiente de Estabilización de Referencia), 30 percent falling due on March 25, 2023, and 70 percent on March 25, 2024. 

All bond swap instruments fall within the deferment of payments ruled by Decree 346/2020 on April 6.
Last week the Finance Secretariat highlighted that it had succeeded in refinancing over 100 percent of the debt payments in pesos falling due in the second quarter, obtaining 11.3 billion pesos in net financing thanks to this normalisation of the peso debt market. This measures favourably against the refinancing of 61 percent in the first quarter.

 

‘Ball with creditors’

Argentina is eager to lift itself out of default and seal a deal to restructure foreign debt, but the onus is on creditors to reach an agreement, Economy Minister Martín Guzmán said this week.

"We want a solution that is not confrontational. We have made a very important effort that demonstrates the will of our government to resolve a situation of default," Guzmán said Wednesday in an interview with the TN television news channel.

The government formalised what it describes as its "final" effort to creditors a week ago. Talks have gone on for months, with the deadline to accept the offer now pushed back to August 4.

"In the offer, we have reached the limit of what Argentina can fo to take care of the Argentine economy and, at the same time, seek an agreement with our creditors. Now the ball is in the creditors' court," said Guzmán, who ruled out another modification to the government's proposal.

Argentina's offer to exchange the bonds, issued under foreign law, offers to pay an average of US$53.50 for every US$100 loaned. That's an improvement on the country's offer that was rejected back in May, which offered around US$39. The proposal also contains a cut in the grace period for payments from three years to one year, with maturities starting to be paid in September 2021.

At least two of the three largest bondholder groups have said they are dissatisfied with the offer and have proposed changes.

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