Argentina’s New Debt Offer Shortens Payment Delay to Two Years
Under the revised proposal, the South American nation wouldn’t pay coupons until 2022. Its initial offer called for a three-year delay. Principal repayments would begin in May 2025, according to a statement from the Economy Ministry.
President Alberto Fernandez’s administration entered talks with its largest creditors on Saturday after formally defaulting for the ninth time in the nation’s history. The government then extended its deadline for a debt deal until June 2, giving the two sides several more days to reach an accord.
Earlier on Thursday night, two of the nation’s largest bondholder groups submitted a joint proposal that they said would provide the country with front-loaded cash flow relief in excess of $36 billion over nine years.
The Ad Hoc Bondholder Group, represented by White & Case LLP, features BlackRock Inc., Ashmore Group Plc and Fidelity Investments. The Exchange Bondholder Group includes Monarch Alternative Capital LP, HBK Capital Management and VR Capital Group Ltd. Notably missing from their offer was a third group of investors called the Argentina Creditor Committee.
“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,” Argentina’s Economy Minister Martin Guzman said. “We hope to continue working with the creditors that make up this group.”
The government said in its own new proposal that there’s a nominal haircut of 7% on new global dollar bonds maturing in 2030, while it’s 5% for global bonds maturing in 2035 and 2046. There’s no haircut listed for dollar-denominated exchange notes held under the 2005 indenture. The new bonds would be issued under the 2016 indenture and have step-up coupons that gradually increase as the maturity date approaches.
Argentina also said it’s open to discuss value recovery mechanisms. An earlier proposal by the Exchange Bondholder Group suggested instruments tied to the nation’s gross domestic product.
BlackRock-Argentina Feud Gets Heated and Sets Back Debt Talks
The nation is burdened by inflation near 50% and an economy that was shrinking even before the pandemic hit. The government has said it needs $40 billion in debt relief to set the nation back on the path to sustainable growth and officials have been in talks with bondholders for more than two months.
“The joint proposal has been specifically designed in good faith to meet the macro-fiscal objectives expressed by the government, and represents a considered and responsible initiative by international asset managers who have invested in Argentina on behalf of millions of savers around the world,” the Ad Hoc Bondholder Group said in a statement.