05/24/2020 - 22:44
Argentina drafted a counterproposal for the payment of the external debt and already probed it this weekend with the Manhattan bondholders. The new payment plan offered by the Ministry of Economy was presented by Minister Martin Guzman unofficially during the meetings he held with the delegates of the Investment Funds. Clarin confirmed that the counterproposal was disclosed in the hermetic and reserved meetings this weekend between the minister and the bondholders.
Argentina's new proposal includes an improvement in payments, with the intention of closing an agreement. Last night there were also important differences between what Argentina is willing to pay and what the bondholders intend to collect. Although both parties expressed a willingness to reach an agreement, difficult days are announced in the negotiations.
Clarín consulted the Treasury Palace yesterday. A qualified source maintained absolute secrecy and decided neither to confirm nor to deny the information. It is protected in the confidentiality contracts signed by Minister Guzman with the Investment Funds to negotiate an agreement. "Until Thursday we are restricted from talking about the debt by the NDA (confidentiality agreement)," the source said, but qualified government sources confirmed to this newspaper that Argentina unofficially presented the new proposal. The minister reportedly probed the content of the new payment plan, during the multiple video-conferences he had with the "wolves" of Wall Street.
Thus, Argentina improved its payment plan and - it had already happened - the bondholders reduced the claims for collection. But the differences still persist and - at the same time - old rispideces reappeared between Guzmán and the representatives of the bondholders.
On Friday came a proposal from the Pimco fund, the largest creditor, which is better than the rest. Although the source consulted said that there is still a long way to go.
According to official sources, the minister began the meetings clarifying that "he was not in the meetings due to the decision of the Argentine government" to reopen the negotiations. This statement had two interpretations for the operators. The positive: that Guzmán conveyed the President's political desire to advance a debt agreement. The other: that Guzman would reopen the negotiations, despite the fact that the Palacio de Hacienda was not convinced of the advantages of reopening the proposal.
This new negotiating instance came to fruition after Argentina's first payment proposal failed. It only had 17.2% acceptance and therefore became unfeasible.
Now the intention would be to formalize in front of creditors, the terms of the new payment plan for next Tuesday or Wednesday.
The minister reportedly anticipated that Argentina would pay an average present value equivalent to 45%. This implies a substantial improvement, in an official effort to prevent Argentina from going into default. Last week it did not pay a maturity, but there was a moderate economic impact because the negotiation was extended until June 2.
The same - the term - could be extended again if necessary. A legal device could be used, to amend the Argentine proposal: this extends the terms for an additional 10 days, until June 12. The times are important because there were advances in the negotiation and there is a willingness to agree on both sides. But despite the new Argentine proposal and the bondholders' counterproposal, the differences continue.
The bondholders lowered their claims and they would be claiming an average present value of payment of 55% of the debt. In other words: a difference of 10 points, representing a whopping $ 6 billion.
They also demand to reduce the grace period and at the same time that Argentina undertakes to pay higher interest.
Guzmán has rejected these proposals and stated that Argentina would have already made a significant effort to improve its payment plan.
The minister - during the meetings - insisted that Argentina cannot make its payment proposal more flexible because it had to comply with the "sustainability plan" of the debt agreed with the International Monetary Fund.