Economy

Argentina is expected to make a new offer to creditors by June 6th

There are still variables or components that shape the offer that can be improved to bring positions closer together

The Argentine economy minister Martín Guzmán
The Argentine economy minister Martín Guzmán. Photo: Screenshot/Martín Guzmán/Twitter
  • According to Clarín, the positions known so far, speaking of the offer’s value, are these: the government is at $40 billion and the bondholders at $60 billion;
  • On the bondholders’ side they say they are willing to go down to $55 billion. On the official side, it is unknown.

In the coming days, Argentina is expected to make a new offer to bondholders in a bid to restructure its $65 billion foreign debt. The country is heading for its ninth sovereign default, as it missed a deadline to pay $503m in interest payments on Friday.

According to the Financial Times and the local press, though, no immediate legal action from creditors is expected, and the negotiation continues. “There is still an important distance to cover but all sides are at the table trying to find a solution,” the Argentine economy minister Martín Guzmán told the Financial Times on Friday. According to him, negotiations were going well and there is “increasing mutual understanding” between both sides.

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A new offer is expected by June 6, but this deadline, too, a source told FT, could be extended again.

According to Clarín, the positions known so far, speaking of the offer’s value, are these: the government is at $40 billion and the bondholders at $60 billion. On the bondholders’ side they say they are willing to go down to $55 billion. On the official side, it is unknown.

In any case, points out Clarín, there are variables or components that shape the offer that can be retouched to bring positions closer together. The Argentine government’s intention, at this point, is basically to pay as little as possible for as long as possible. For this reason, it sought a 4-year grace period and very low-interest coupons, which start at 0.5% per year and on average do not exceed 2.5%. In addition to a deduction on the capital of 5.4%. Nor does it want to pay the interest accrued on the bonds during those four years. Guzmán’s plan was to start with annual payments close to $300 million from November 2023, informed Clarín.

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On the other side, the bondholders say that only less than 20% of the exchangeable bonds could enter the exchange. In general, they seek to shorten the grace period, increase the amount of the coupons, and advance the principal payment installments. In the offers known days ago, the average coupon of all coupons ranges between 4.45% and 5%. The counterparts are estimated to increase the annual interest payment to about $700 million, but starting in 2021.

The government plans to save about $32 billion between capital and interest. Counterproposals so far reduce that to $18 billion to $20 billion.