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ECONOMY | 17-05-2020 21:22

Government studies counter-offers as debt talks enter crucial week

Government is continuing to analyse three counter-offers from creditors they hope will break the debt deadlock.

With Argentina’s attempt to restructure more than US$65 billion in debt entering a decisive week, the government is continuing to analyse three counter-offers from creditors they hope will break the deadlock.

The proposals were submitted by bondholders at the tail end of the last working week, seven days before a key US$500-million payment is due.  Sources close to the Casa Rosada say none of the proposals have been rejected so far.

"We received the proposals at the last minute [on Friday] and we are still evaluating them," a senior government source told the AFP news agency, without giving details of their proposals.

President Alberto Fernández’s government is seeking to restructure billions of debt issued in dollars under foreign law. Failure to pay or seal a deal by this Friday, May 22, would see Argentina enter default for the ninth time in his history.

The majority of bondholders have already rejected Argentina’s offer, put together by Economy Minister Martín Guzmán, which called for a three-year-grace period on payments, a 62 percent cut in interest (worth US$37.9 billion) and a 5.4 percent cut in the principal (US$3.6 billion)

Guzmán said during a videoconference event this week that Argentina was “open to listen” and seeking “constructive and productive meetings” with creditors.

Once news of the proposals became public knowledge, the Economy Ministry issued a statement saying that Argentina was “analysing the characteristics of these proposals and their implications for the objective of restoring the sustainability of public debt."

On Sunday night, President Fernández huddled at the Olivos presidential residence with Guzmán, Productive Development Minister Matías Kulfas and Cabinet Chief Santiago Cafiero to study the offers and debate their next move. 

However, in an interview published the same day, Guzmán said ihat Argentina would not “mortgage its future.”

“Success is not an agreement that mortgages the future of Argentina and leaves us hostage to a problem," he told Centinal.

Details of offers

Speculation raged in the local press over the weekend as to the content of the offers, which came on the back of reports saying that relations had become particularly strained with some creditors, especially BlackRock.

The proposals are a result of the government’s request for creditors to propose their terms, following the missing of the self-imposed May 8 deadline. 

On Friday, at least two groups – the Group of Restructured Bondholders (who engaged in debt swaps in 2005 and 2010), and the Argentina Creditors Committee (ACC, which heads the Greylock Capital fund)  – united to deliver one offer to the authorities. 

Another counter-offer was delivered by the Ad Hoc group of creditors, which includes BlackRock and Fidelity and covers mostly debt holders who took on bonds after 2016.

Reports have suggested that talks may go beyond the May 22 deadline, given the high-profile nature of the talks and the fact that both sides have said publicly they want to avoid a default.

President Fernández has repeatedly said Argentina is willing to pay its debt, but that it lacks the means to do so, especially with the added problem of the coronavirus pandemic and its accompanying economic fall-out.

"I don't know what the [creditors’] counterproposal is,” he said last week. “But if there is one, we will see what it is about. We are not foolish or irresponsible."

Reacting to reports that a deal may be possible, Argentina’s country risk index (JP Morgan) dropped on Friday to less than 3,000 points for the first time since March. 

"We want to listen, we want to see what alternative ideas we can take to reach an agreement that works for everyone," Guzmán said on Friday..

"We want the commitments we make to be honoured. We do not want to make the mistakes of the past," added the minister.

Some officials said this week that entering default would not be as devastating as previous ones.

"If the global bonds are not paid, the impact will not be major, because the process of dialogue continues. It is not a process of free-fall, as was the default in 2001," said Sergio Chodos, Argentine representative to the IMF, speaking to local radio.



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