05/04/2020 - 15:55
- Clarín.com
- Economy
- Economy
A group of Argentine creditors, representing 18 investment funds, confirmed that they will reject the debt restructuring offer. The bondholders, who have 15% of the securities that are being exchanged, also invited other creditors' associations not to accept the proposal of the Argentine government. Some banks and brokerage houses informed their clients that they have time until tomorrow to enter the swap. On Friday the deadline launched by the Ministry of Economy in its offer expires.
The objections they presented are of all kinds: most are economic, because they believe that they resign a lot of money; and legal, because they understand that the new bonds have less legal protection for their holders . And they even consider that Argentina did not even make the offer suggested by the IMF (a proposal that Minister Martín Guzmán presents as a justification for its actions), because it projects very low growth for the Argentine economy, which would leave the country, in terms of GDP per capital, closer to Paraguay than to Brazil. In short, they argued that Argentina could offer a better offer, even taking the sustainability parameters outlined by the IMF staff as a reference.
Minutes after the public talk offered by the bondholders via the web was financed, the Ministry of Economy appeared with a response response. "The Government of Argentina has reviewed and is disappointed with the statement of today by three groups of creditors. Much can change over the course of a week. We hope that our creditors will recognize that, especially in the wake of the COVID-19 crisis, Argentina cannot pay more . We have published our debt sustainability analysis and it is aligned with that of the International Monetary Fund. "
The statement opens, in the next paragraph, what seems like a door to negotiate with creditors. "If bondholders have a different approach that suits those limitations, they should come up with a specific proposal. The Argentine government remains willing to listen and try to find a common denominator. But any proposal must first pass the test of common sense." , the economy ministry said in a statement.
The decision not to pay for three years, contained in the Argentine proposal, is the most questioned. But there is also resistance to the fact that there is no compensation for unpaid interest for the years that Argentina does not make payments . "Nor is there a greater value to the offer if Argentina recovers growth", according to Thomas Moatti, of Pharo Management, one of the three exhibitors.
"The IMF proposed scenarios for the Argentine debt, which are those that it claims to follow the proposal, but none is like the one in the offer of the Argentine government," they warn. The IMF understands that, by 2030, the country could not allocate more than 3% of its GDP to the payment of external debt. "The current capacity would be marking an economy of US $ 400,000 million in 2030. If one looks at the GDP per capita of different countries in the region (according to a GDP report), the Argentine economy in 2030 is headed to be like that of Paraguay , while we understand that the IMF recommends that Argentina follow the path (of growth) of Brazil ”, they criticize.
“Creditors who accept will also lose legal protections. They are left without rights to be part of a future offer that improves the terms, and they also have shorter terms to litigate within the legal framework of this offer. They will have to give up legal protections they had from the 2005 and 2010 swaps that was better, ”according to Dennis Hranitzky of the law firm Emanuel Urquhart & Sullivan.
Investors understand the emergence of the Covid-19. But they state that Argentina does not follow the recommendation to suspend the payment of debts during the pandemic, but trying not to affect the nominal value of the debts, but rather it is a "3-year confiscation." It wants to restructure a debt that matures in 2033 and 2038, but for the current crisis, the country should discuss its situation in the very short term, not a decade from now, ”they object.
"There are no payments until 2023. In the bonds that mature in 2043, they propose to start paying very low coupons from 2028. Creditors in euros are treated worse than those of dollars, because they change their legislation (they were under the law from London and passes them to New York law) and they have to go from euros to dollars (currently, the euro is trading above the dollar, ”they object.
Creditors understand that Ecuador, also in trouble paying its debt, achieved 90% adherence in an exchange because it worked "together (with the bondholders) and not in a unilateral way, as Argentina did." For the analysis, they divided the country's emissions into two categories: Par-Discount (from 2005 and 2010) and "Macri bonds", which are those from 2016 onwards. If Argentina recovers - and the country risk begins to drop, the offer may be worth up to 60% in dollars for the Par and Discount, and between 52% and 55% for those issued after 2016. In euros, the valuation of the offer falls. And if the country does not recover -that is to say, investors continue to demand high rates to lend to Argentina-, the offer is worth between 16% and 25%.
According to the lawyers, the creditors who enter the exchange will receive “new bonds that worsen their legal situation. They will be issued with the clauses of 2016, by which Argentina can end the offer at any time and even redesign the votes when it comes to counting the acceptance of the offer, ”they criticize.
Creditors will have less time to litigate in the event of default, and will lose the power to request the embargo of Argentine assets, as if they could do the holdouts that did not enter the exchange of 2005 and 2010, who had more rights.