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ECONOMY | 19-05-2020 18:02

Creditors, government still far apart on debt offers as deadline looms

In a webinar, Economy Minister Martín Guzmán says he expected negotiations to extend past May 22. Two sides remain some way apart, just days before default deadline arrives.

Argentina and creditors seeking to hash out a US$65-billion bond restructuring are still far apart, just days away from a deadline that could plunge the country into default.

The parties have continued talks since bondholders submitted two counter-proposals Friday, but there’s been little progress with a gap of about 20 cents on the dollar between the government’s offer and the most aggressive creditors, according to people with direct knowledge of the matter.

Top Argentine officials have asked advisers to work on a new proposal that incorporates creditors’ feedback but maintains a three-year moratorium on debt payments, some of the people said.

The talks are urgent as the country and its bondholders stare down a May 22 deadline, when the grace period expires on US$500 million of overdue interest payments. Failure to hand over the money or reach an accord by then would mark the country’s ninth default in its 200-year history and potentially set off a painful court battle if extended talks broke down completely.

The Exchange Bondholder Group, alongside the Argentina Creditor Committee, Fintech Advisory and Gramercy Funds Management, submitted a joint proposal to the government Friday that people familiar with the matter said would give bondholders about 55 cents on the dollar. A separate group that includes BlackRock Inc., Ashmore Group Plc and Fidelity Investments sent a plan that the people valued at about 59 cents on the dollar.

An Economy Ministry spokesman declined to comment.

In a webinar held Tuesday, Economy Minister Martín Guzmán said he expected negotiations to extend past May 22.

The first group released the portion of its proposal for bonds that were issued in 2005 and 2010 late Monday. The group proposed an instrument tied to gross domestic product, called for a shorter grace period on coupons and a longer one on principal payments.

The counter-offer made by the group that includes BlackRock proposes recovery levels near 50 cents on the dollar for par bonds due 2038 and recovery levels above 60 cents on the dollar for discount bonds due in 2033 and bonds issued after 2016, said some of the people.

The government’s original offer was about 39 cents on the dollar, said the people. Argentina is willing to keep negotiating past May 22, and at this point is not planning to make the payment due that day, said some of the people.

Negotiations started more than two months ago, and Argentina’s proposal has sought US$40 million of debt relief and a three-year moratorium on debt payments. The country, home to South America’s second-largest economy, says it can’t meet its obligations amid high unemployment, a sharp drop in the value of its currency, accelerating inflation and a deep recession made worse by the coronavirus pandemic.

by Ignacio Olivera Doll & Ben Bartenstein, Bloomberg

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