By Adam Jourdan
BUENOS AIRES (Reuters) – Argentina will extend negotiations over a $65 billion debt restructuring proposal until May 22, the government said in the official gazette on Monday, setting the stage for tense last-ditch talks as the South American nation races to avoid default.
The new deadline, which comes after an initial cut-off passed on Friday without the support needed for a comprehensive deal, means the offer will expire the same day Argentina could trigger default over a $500 million interest payment.
The major grains producer is racing to revamp unsustainable debts amid a painful recession, high inflation and increasingly expensive borrowing costs as concerns over a potential ninth sovereign default have rattled investors and hit bond prices.
The talks so far have not been simple, with three major creditor groups rejecting the initial proposal and pushing for improved terms. Argentine officials have said the country cannot afford to pay more, though they are open to counterproposals.
“Clearly, both sides are playing hardball,” Capital Economics said in a note on Monday, adding talks were likely to drag on and that creditors could face large haircuts, especially with the global coronavirus pandemic sapping growth.
“The government is facing ever-growing demands on its purse as the health crisis continues,” it said. “Accordingly, recovery rates for foreign bondholders of around 30% are looking increasingly likely.”
Analysts calculate that the current offer, which includes a three-year payment halt, a large cut to coupon payments and maturities pushed back to 2030 and beyond amounts to a net present value of around 30-35%.
Bondholders say this needs to be raised to gain support.
INCREASE PARTICIPATION
Argentina’s Economy Ministry said in the gazette that the decision to extend the deadline was based on an analysis of the current situation with its initial proposal. The government has not said what exact level of support that offer garnered.
“It is convenient to extend that date in order to increase participation and continue with the active communication agenda with the holders of the eligible securities,” it said.
The invitation closes on May 22 at 5 p.m. New York time (2100 GMT). The results of the offer will be announced around May 25 with a settlement date of May 27.
The bonds in question include collective action clauses which mean the government needs to meet a threshold of investor support in order to move ahead with comprehensive restructuring.
Argentina’s bonds, which have fallen steeply since the middle of last year, are already trading at distressed levels, with most around 25-30 cents on the dollar.
The country’s largest province Buenos Aires is facing a separate debt crisis of its own, with an offer to holders of its foreign law bonds to restructure around $7 billion in debt due to expire later on Monday as well.
A major creditor group has already rejected the proposal from the province, which also faces bond repayments on Monday, which if missed could trigger a local government default.
For a graphic on Argentine bonds’ wild ride, click https://fingfx.thomsonreuters.com/gfx/mkt/jznpnenjmvl/ArgentinaBonds.png
(Reporting by Adam Jourdan; Editing by Toby Chopra and Chizu Nomiyama)
