Argentina Debt Proposals Far Apart With Deadline Looming
Customers and workers wearing protective masks wait in front of a shopping gallery in Buenos Aires, Argentina. (Photographer: Sarah Pabst/Bloomberg)

Argentina Debt Proposals Far Apart With Deadline Looming

(Bloomberg) -- Argentina and creditors seeking to hash out a $65 billion bond restructuring are still far apart, just days away from a deadline that could plunge the country into default.

Talks have continued since bondholders sent two counterproposals Friday, but there’s a gap of about 20 cents on the dollar between the government’s offer and the most aggressive creditors, according to people with direct knowledge of the matter. Argentine officials have asked advisers to work on a new proposal that incorporates investors’ feedback but maintains a three-year moratorium on debt payments, some of the people said.

In an online forum Tuesday, Economy Minister Martin Guzman said he expected negotiations to extend past May 22, when the grace period expires on $500 million of overdue interest payments. Failure to hand over the money or reach an accord by then would mark the country’s ninth default in its 200-year history and potentially set off a painful court battle if bondholders decide there’s little chance of an agreement and move to file a lawsuit instead.

“We are having a constructive dialogue with the bondholders,” Guzman said in the online event.

The Exchange Bondholder Group -- alongside the Argentina Creditor Committee, Fintech Advisory and Gramercy Funds Management -- submitted a joint proposal to the government Friday that people familiar with the matter said would give bondholders about 55 cents on the dollar. A separate group that includes BlackRock Inc., Ashmore Group Plc and Fidelity Investments sent a plan that the people valued at about 59 cents on the dollar.

An Economy Ministry spokesman declined to comment.

Argentine creditors are unlikely to immediately seek to accelerate debt payments if the May 22 deadline is missed as long as talks are continuing, Alberto Bernal, the chief global strategist at XP Investments, wrote in a note to clients. It’s crucial the government maintains an “inclusive tone in the negotiations,” he added.

The group that formed a joint proposal released the portion of its plan for bonds that were issued in 2005 and 2010 late Monday. It called for giving investors an instrument tied to gross domestic product, called for a shorter moratorium on coupons and a longer one on principal payments.

Read More: Argentina Exchange Creditors Suggest GDP Instruments in Deal

The BlackRock-led group sought recovery levels near 50 cents on the dollar for par bonds due 2038 as well as recovery levels above 60 cents on the dollar for discount bonds due in 2033 and bonds issued after 2016, said some of the people.

The government’s original offer was an average of about 39 cents on the dollar, said the people.

Negotiations started more than two months ago, and Argentina’s proposal had sought $40 million of debt relief and a three-year moratorium on debt payments. The country, home to South America’s second-largest economy, says it can’t meet its obligations amid high unemployment, a sharp drop in the value of its currency, accelerating inflation and a deep recession made worse by the coronavirus pandemic.

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