Even if Argentina defaults for the ninth time in its history, creditors say the issue could be cured quickly as the two sides work to restructure US$65 billion in overseas bonds.
While some kind of default in Argentina is likely, investors said a default wouldn’t be immediately followed by litigation because taking legal action amid the talks solves nothing, creditors including Guggenheim’s Mark Walker said in a Wilson Center webinar on Thursday.
Argentina and its bondholders aren’t likely to reach a deal before May 22, when a grace period on US$500 million in overdue interest ends. While Argentina will be in default if it doesn’t pay or reach an agreement by that date, there’s a desire to resolve the negotiations, Greylock’s Hans Humes said in the online event.
“It’s going to be difficult for Argentina to avoid some sort of hard default,” Humes said. “Though any kind of default event can be cured in short order.”
Humes, whose fund belongs to the Argentina Creditor Committee bondholder group and is involved in the talks, said that a resolution was in all parties’ best interest, and that greater flexibility was needed by both sides to reach an agreement.
“I would hate to have something as disorderly as a hard default,” Humes said.
Argentina is planning to extend the deadline for creditors to consider an initial debt restructuring offer into early June as both sides need more time to reach a deal, according to people with direct knowledge of the matter.
The government will stick to the same offer it presented in mid-April, allowing several more weeks for talks between the parties to continue, said the people, who could not be named because the negotiations are private. In the meantime, Argentina plans to miss a delayed interest payment on about US$500 million due Friday, the people said.
Government officials, who are still digesting the bondholder counteroffers received last week, don’t plan on presenting their own new proposal for now as both sides remain far apart on the net present value needed to reach a deal, the people added. The talks may be extended by at least 10 days, one of them said.