Argentina Faces Critical Decision With $500 Million Payment Due

(Bloomberg) -- Argentina is facing a day of reckoning as it stares down $500 million in interest payments while it seeks to renegotiate terms on its sovereign debt.

Skipping the coupons due today on three global bonds would trigger a 30-day grace period that Argentina could use to reach a settlement with creditors before going into a hard default. Making the payment would reduce pressure on the talks, but could also be seen as a waste of money since both creditors and the government say debt relief is needed and inevitable.

The country officially started a $65 billion debt restructuring Wednesday, reiterating terms first unveiled last week that would push back interest and capital payments to save some $40 billion. A filing to the Luxembourg Stock Exchange said holders have until May 8 to accept the proposal, and while the terms were more friendly than some investors had expected, several large creditor groups said they needed better terms to sign off on the deal.

Government officials haven’t said directly if they intend to make the payments today, but most investors expect them to skip and that’s been priced into markets, according to Ramiro Blazquez, the head of strategy at Banctrust & Co. in Buenos Aires.

“It’s almost a given,” Blazquez said. “They want to accelerate the negotiations to finalize this process as quickly as possible.”

Bonds due April 2021, among those with the payment due today, were little changed at about 31 cents on the dollar as of 8:30 a.m New York time. They slipped 1.3 cents on Tuesday.

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