Annabella Quiroga
02/03/2020 - 20:50
- Clarín.com
- Economy
- Economy
Very early, four hours before the markets opened, Governor Axel Kicillof revalued the financial scene of the province of Buenos Aires and opted to substantially improve the drastic proposal he had left on the creditors' table twenty days ago. That unilateral approach, which implied delaying the payment of a title for US $ 250 million for 95 days , was received with indifference by the bondholders. Just 48 hours after officially entering default, now the governor announced that he is willing to pay only 30% of the BP21 maturity corresponding to January 26. Thus, if the offer is accepted by 75% of the bondholders, the province will pay US $ 75 million of amortization plus another US $ 5 million of interest. And it postpones until May 1 the payment of the remaining 70% of capital.
Creditors have time until 6 am this Tuesday , Buenos Aires time, to decide whether or not to accept. So far the proposal has caused mixed reactions: one of the creditors' committees, which brings together an indeterminate number of bondholders, has already announced that it will accept it. Instead it transpired that the Fidelity investment fund, which has 17% of the BP21's possession, continues to reject the offer and would be demanding an improvement that leads to the initial payment of the current 30% to 50% .
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In order for the postponement of the payment of 70% of the due date to May 1 to be valid, it is essential to achieve an adhesion of 75%. This Monday the governor told El Destape Radio that there was "an acceptance of a significant amount" to the new proposal. However, he admitted that "there is a fund that has a significant amount and is not showing the same degree of adherence and help in the constructive dialogue and in good faith we had. What we are waiting for is to accept the proposal."
Despite the tension, the market sniffs that after having yielded, Kicillof is heading to reach the agreement . On Monday the country risk fell 3.7%, to 2013 basis points, with the dollar bonds of the national government pulling in favor. The positive streak was not even cut when it became official that, given the low acceptance, the term was extended by 24 hours so that the bondholders of the dual bond AF20 accept to exchange it for any of the roles offered by the Ministry of Economy. This announcement did hit hard in the bond market in pesos, with the AF20 collapsing 5.1%.
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Economists believe that with the new offer there are good chances Buenos Aires achieves the 75% membership it needs . If these expectations are met, Kicillof will have avoided the precipice, but the risk of approaching the default will remain on the horizon.
"In the chicken game, the first to fly loses, " said Gabriel Caamaño of Consultant Ledesma. The allusion to the competition in which two cars accelerate until one of the drivers gets scared and runs is one of the most used analogies for Kicillof's approach. "The province has no resources to pay. Accepting the agreement is the last opportunity for bondholders," said the governor. But given the intransigence of the creditors and the certainty that the Nation would not help , Kicillof understood that it was time to fly.
Santiago Abdala, director of PPI, indicates that if the province went into default this situation would impact on the restructuring of the debt that the Nation is facing. "Consequently, and by logic, who should loosen was Kicillof. He did so, although his negotiating skills were again questioned. It would be really a strong strategic mistake to complicate the sovereign scenario for US $ 250 million."
"Everything is very sloppy," said Gustavo Neffa of Research for Traders. "Kicillof originally sought to postpone the total payment to May 1 because his expectation was that by then the restructuring of the national debt would be finished and then the province could join that re-inflation under similar conditions . But it is not so clear that the Nation has all closed for that date. The new proposal of Kicillof is quite friendly . I think it will get 75% approval. The problem is that it sets a precedent for the negotiation of the rest of the Buenos Aires debt. "
According to Elypsis, Kicillof should pay US $ 2,705 million in 2020 . The majority is under foreign law and 82% is in dollars.
"In every negotiation there is a tug of war. But here the initial strategy has already failed because it was too extreme . He has already flirted with the default. Now that he loosened the creditors, they are going to try to get him something else," said Caamaño.