Argentina Bonds Rally With $65 Billion Debt Deal In Sight

Argentina Bonds Rally With $65 Billion Debt Deal In Sight

20:29 - Argentina, creditors closer to debt deal after months of talks. Sunday call between government, BlackRock led to breakthrough.

By Michael O'Boyle, Jorgelina Do Rosario, and Carolina Millan

Argentine bonds rallied to the highest in nearly five months as the government and some of its top creditors moved closer to an agreement to restructure $65 billion of debt.

The two sides made progress over the weekend and are discussing a deal where bondholders would receive about 54.8 cents on the dollar, close to the midpoint of the most recent offers from creditors and Argentina, according to people with direct knowledge of the matter. The country’s $4.25 billion in bonds due 2028 climbed 1.5 cents to 43.3 cents on the dollar, while the benchmark Merval stock index gained 6.6%, the most in almost a month.

The breakthrough came during a call on Sunday between Argentine Economy Minister Martin Guzman and BlackRock Inc managing director Jennifer O’Neil, two of the people said, with participation of Bank of America Corp, which is advising the government. The people asked not to be named discussing the content of private talks.

The Economy Ministry’s press office declined to comment. Representatives for the creditor groups, BlackRock and Bank of America did not immediately reply to a request for comment on developments.

Fine points of the deal, including clauses which bolster creditor rights by closing legal loopholes for bond contracts were still under discussion, the people said. Before the latest talks, the gap
between the two negotiating positions had been only about 3 cents on the dollar on a net present value basis, according to Goldman Sachs Group Inc and Morgan Stanley analysts.

“The market seems to be pricing in that an agreement is close,” said Juan Manuel Pazos, chief economist at TPCG Valores SA in Buenos Aires, who warned against considering it a done deal until it’s officially announced.

The country’s bonds have been trading flat since the government defaulted on May 22.

An agreement would end months of negotiations between the government and key bondholders including BlackRock, Ashmore Group Plc, and Fidelity Investments, and mark a first step toward
stabilizing a struggling economy. Inflation hovers near 45%, the peso has lost 87% of its value since late 2015 and the economy is poised for its third straight year of recession amid a record
contraction in 2020.

Efforts are now focused on getting more bondholders on board and to release a statement of support signed by the main creditor groups, known as the Ad Hoc Bondholder group, the Exchange Bondholder group and the Argentina Creditor Committee, one of the people said. That bloc, which says it holds over 50% of the country’s overseas debt, had last month rejected the government’s official offer and said it would not support it.

The deadline for Argentina’s current proposal, which is due to expire Tuesday, should be extended again as the government will need to publish a new decree including the changes and then submit it to the U.S. Securities and Exchange Commission so that it is publicly available for at least 10 days, the people said. The settlement date would remain Sept. 4, according to the people familiar.

The possibility of a deal comes after Ecuador won on Monday the support of enough bondholders to restructure $17.4 billion in international debt, almost a third of its total foreign obligations. The South American nation, which received backing from holders of over 95% of its bonds, said it will extend the deadline for creditors to participate in the debt offer until Friday to allow for holders who didn’t vote yet.

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