Argentina Is Planning to Extend Debt Deadline Until May 22

Argentina Is Planning to Extend Debt Deadline Until May 22

Argentina has given bondholders more time to consider a $65 billion restructuring offer, re-opening a window to reach an agreement that would prevent the country’s ninth default.

The deadline has been extended to May 22 after bondholders opposed the offer. The previous cut-off was May 8, and the extension means results will now be announced on May 25 and liquidated on May 27, the government said in a resolution published in the Official Gazette on Monday. Bloomberg reported the plans to prolong the deadline on Sunday.

The new deadline will occur as about $500 million of delayed interest payments become due. Failure to reach an agreement or pay the cash by that date would result in a default.

“This will give the government time to revise its proposal on the basis of the feedback it has received, about which it is open, in contrast with its last large restructuring,” said Richard Segal, a senior analyst at Manulife Investment Management in London, which has $409 billion of assets, including Argentina’s debt. “Investors recognize that Argentina can’t afford to pay much near- to medium-term. There is a chance that the next payments will be made so that the process can continue without the country being in default.”

The bonds had edged higher last week on hopes the parties were getting closer to a deal, but still trade at deeply distressed levels near 30 cents on the dollar. They were little changed in early London trade, with the $4.5 billion securities due 2021 trading at around 30.5 cents on the dollar.

Days before the original deadline on Friday, the country’s three largest creditor groups had already rejected the terms of the offer, which asked bondholders to take significant losses on interest and set a three-year grace period before any payments are made.

“We continue to dialogue in good faith with creditors with the aim of reaching a sustainable agreement,” President Alberto Fernandez said in a tweet over the weekend.

Argentina has won the backing of the International Monetary Fund and academics including Joseph Stiglitz and Jeffrey Sachs, and insisted that even before the coronavirus pandemic began wrecking its economy, it was unable to pay what is owed.

To close the deal, the South American nation needs the support from creditors owning at least two-thirds on some of the outstanding bonds’ face value. Economy Minister Martin Guzman said May 6 the country is open to tweaking the exact terms of the offer, as long as it leaves Argentina with a sustainable debt burden.

A spokesman for the Economy Ministry didn’t immediately respond to a request for comment sent after official work hours.

The Province of Buenos Aires, which has followed the national government in submitting a proposal to rework $7 billion of its foreign debt, has also given creditors until Monday to accept its initial offer. The province’s creditor group has panned the proposal, saying the deal represents a 60% loss to bondholders.

The South American country, which resolved its previous default just four years ago, failed to rebound under Mauricio Macri, the market-friendly former president who was voted out of office last year. The agriculture powerhouse is poised to contract for a third-consecutive year in 2020 and is battling with a widening gap between its official and unofficial exchange rates due to capital controls and annual inflation that’s still hovering above 48%.

— With assistance by Charlie Devereux, and Netty Idayu Ismail

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