Tuesday, February 20, 2024

ECONOMY | 06-06-2020 08:30

Government ‘optimistic’ debt deal with creditors will be agreed soon

Guzmán warns against rumours in press, saying bondholders are “playing hard”; IMF once again breaks ground to offer support for Argentina’s debt restructuring efforts.

The government said this week it is “optimistic” a deal will soon be reached with Argentina’s creditors to restructure more than US$65 billion in foreign debt.

Foreign Minister Felipe Solá, who acknowledged the International Monetary Fund’s (IMF) support for Buenos Aires, described the government’s offer as “acceptable” and said hopeful of a deal being sealed.

“The Argentine offer is an acceptable offer,” he said. “Argentina is offering what it can pay if its economy recovers. I am optimistic.”

The government is seeking an agreement with creditors on debt issued in dollars that falls under foreign legislation. After the expiration of a deadline last Tuesday, talks were extended until June 12.

Argentina fell into default on April 22, when it defaulted on just over US$500 million in interest payments due on three bonds that are involved in the debt swap proposal.

Both sides have exchanged offers and counter-offers, and creditors now said to be awaiting a redrawing of the government's latest proposal, in an attempt to avoid going to court in a costly and lengthy process, as followed Argentina’s 2001 default. 

Negotiations are now operating under the terms of a confidentiality agreement, introduced at the request of the Economy Ministry.

The government’s first proposal to creditors, which was rejected, included a three-year grace period on payments and a 62 percent reduction in interest and a 5.4 percent snip of capital.

‘Serious and honest’

Solá praised Economy Minister Martín Guzmán’s approach to debt talks and said rumours of unhappiness on the part of creditors was part of the game. Reports in recent weeks have suggested some bondholders are critical of what they see as an aggressive approach to negotiations.

"Argentina has a serious and honest approach. Guzmán is very capable of what he is doing. A negotiation has demands and threats. Nothing is settled until everything is settled," Solá said in a radio interview.

Guzmán, who is overseeing the restructuring efforts, said Thursday that the government was working “seriously” to “resolve” the issue. He also cautioned against briefings to the press as talks enter the final stretch.

"In these days of negotiations, there are obviously many voices echoing, representing great interests,” said the minister. "Those voices that come from concentrated interests that seek to generate a noise that confuses. But there is no chance that we will be confused."

In comments reported by Clarín, he warned that “there are a lot of interests at stake here and there are people playing hard.”

Nevertheless, a report by Retuers on Thursday quoted an unnamed bondholder who said a deal was “close.”

“We’re getting close and think there’s quite a lot of potential upside, particularly as money flows back into emerging markets and Argentina will benefit as it’s a high yield, liquid credit,” the anonymous creditor told the news agency. “We think a deal will be done in the next week and a half. It seems that everyone wants to move on from this.”

The markets also seem to be in agreement.

“We remain of the view that a deal is likely to be achieved over the next several weeks,” Goldman Sachs said in a note to investors on Tuesday., warning that the government was unlikely to improve its existing offer substantially.

IMF ‘hopeful’ of deal

International Monetary Fund (IMF) spokesman Gerry Rice said Thursday that the agency remains "hopeful" that Argentina and its creditors would soon reach an agreement

"We are hopeful that an agreement can be reached that will restore the sustainability of the debt," Rice told reporters at a virtual press conference, reiterating the IMF’s support for Buenos Aires. 

"As we have said recently, we are encouraged by the willingness of all parties to continue participating to reach a consensus," Rice added. 

The government has repeatedly insisted that any debt deal must be “sustainable” and the IMF has echoed those sentiments, showing support for the Alberto Fernández administration’s stance.

Argentina owes the Fund US$44 billion, loaned as part of a record-breaking US$56-billion bailout provided by the IMF to the previous government, led by former president Mauricio Macri, in 2018.

BA Province extends deadline

On Thursday, the Buenos Aires Province government announced that the deadline for its own debt restructuring efforts had been extended until June 19.

The provincial administration said negotiations with creditors would enter a new stage, with officials “intensifying dialogue with investors who have not yet accepted” their proposal to restructure around US$7.148 billion in debt.

“There is a certain margin to introduce changes to the offer and, in turn, respect the sustainability framework drawn up by the province,” the region’s economy minister, Pablo López, said in a statement.


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