Argentina and its key bondholders are getting closer to a $65bn debt restructuring deal after the country defaulted on its overseas debt for the ninth time in its history.
While still at odds over several key issues, the latest changes in the proposals by the government and two groups of creditors published Thursday signal the difference between both sides is narrowing. Argentina is now weighing extending the deadline for its offer beyond June 2, giving the parties more time to reach a deal, according to people with direct knowledge of the matter.
President Alberto Fernandez’s government continues to work on amendments to its revised proposal, said the people, who could not be named because the talks are private. The negotiations may be extended by at least another 10 days, one of them said.
The country’s debt negotiations started more than two months ago, as the country said it can’t meet its obligations amid high unemployment, a sharp drop in the value of its currency and a three-year contraction made worse by the coronavirus pandemic. The government has said it needs $40bn in debt relief to set the nation back on the path to sustainable growth.
In its revised offer Thursday, Argentina proposed a payment moratorium for just two years, instead of three years included in its original offer, among other changes. Nevertheless, the offer won’t be binding until it’s sent for registration under the US Securities and Exchange Commission.
Meanwhile, two of the nation’s largest bondholder groups, which include funds such as BlackRock Inc, Ashmore Group Plc and Monarch Alternative Capital LP, also said they submitted a joint proposal on Thursday that would provide the country with front-loaded cash flow relief of $36bn over nine years. The offer would also reduce coupons by an average of 32%, and extend maturities with no amortisation payments before 2025.
Yet the government called the bondholders’ proposal “insufficient,” indicating that the distance between both sides continues to be relevant and that negotiations may still fail.
“The group of Ad Hoc creditors moved in the right direction with respect to its previous offer, but the move was short and insufficient for the needs of the country,” Economy Minister Martin Guzman said in a statement late Thursday. “We hope to continue working with the creditors that make up this group, which today are the ones that are furthest from the restrictions that our country faces.”
Argentina’s revised proposal includes a nominal haircut of 7% to the principal on global dollar bonds maturing in 2030 and a 5% reduction for global bonds maturing in 2035 and 2046. No principal would be returned to investors until 2025. There’s no haircut listed for dollar-denominated exchange notes issued after a previous default. The new bonds to come out of the exchange would have coupons that gradually increase as the maturity date approaches.
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