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Debt, Deadlines and Default: Argentina's Last-Ditch Push for $65 Billion Deal

Debt, Deadlines and Default: Argentina's Last-Ditch Push for $65 Billion Deal

Argentina and its international creditors are racing to find middle-ground over a $65 billion debt restructuring, with sources close to the government indicating it may be willing to be flexible to break a deadlock that risks triggering a default.

The talks face a first key deadline on Friday and a harder cutoff on May 22 when the country could enter default, as a grace period for $500 million of interest payments comes to an end.

There's unlikely, however, to be a clean-cut result soon.

Argentina is at loggerheads with its creditors over its proposal to impose large reductions on coupons on a range of debt, a three-year payment hiatus, and to push back maturities into the next decade.

With the economy already struggling to escape a painful recession before the coronavirus pandemic hit, Argentine negotiators want to avoid what would be its ninth default. Such an outcome would damage access to global finance, with investors already wary after decades of volatility.

"We are hopeful and we will keep moving forward... It's a longer process than deadlines," said a person close to Argentina's discussions with its international creditors, who declined to be named as the talks are private.

The person said Argentina's government may accept tenders made on the offer on Friday even if the number of tenders is low, and then continue dialogue with those debt holders who rejected the offer, trying to "eat one dinosaur a day."
"Even if tomorrow comes and we have a good acceptance it's not the end of anything either," he said, adding the deadlines were just milestones in a process that was "tedious at moments, stressful at times."

Argentina's economy ministry declined to comment.

The ministry has said some bondholders have accepted its proposal, though three major creditor groups have publicly rejected it, with one calling it "stillborn." Government officials have said Argentina cannot pay more.

Argentine Economy Minister Martin Guzman told Reuters this week that the country was working with bondholders to close the gap between the two sides, even if the deal was not proving an easy sell.

Guzman said there was wiggle room if a proposal fitted with the government's debt sustainability analysis.

Most expect that talks will go well beyond the end of this week and likely pass the May 22 deadline, the trip wire for a foreign debt default.

That could have a knock-on effect on Argentina's already fragile markets, though bonds themselves are already at default levels of around 20-35 cents on the dollar.

"They will have to change the deadline. Then they'll say let's talk some more with a little bit more money on the table," said one international creditor, who holds bonds involved in the restructuring.

Another bondholder in one of the three main creditor committees said the current standoff was a "bit of show" and that while negotiations would be protracted he was confident of an eventual deal.

"We will go through several iterations of negotiations but I think it can be done within a year," he said, adding that Argentine President Alberto Fernandez was "pragmatic" and wanted to get investments and the stalled economy going once more.

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