05/04/2020 - 9:18
Three important groups of creditors of Argentine debt bonds today formally expressed their rejection of the exchange proposal presented by the Argentine government .
In a statement released this morning, they note: "The Ad Hoc Group of Bondholders, the Argentine Creditors Committee and the Ad Hoc Group of Foreign Exchange Bond Holders collectively represent a broad and diverse spectrum of sovereign bondholders from Argentin to. Each group has already publicly rejected the commercial terms proposed by Argentina for the restructuring of its external debt. ”
They add that “Each of the three groups of bondholders and the institutions they represent, along with several other investors, wish to reiterate and make it clear that they cannot support the exchange offer recently announced by the Republic, and will not deliver their bonds. in said offer, because, among other reasons, the terms require that Argentine bondholders suffer disproportionate losses that are neither justified nor necessary. However, each of the three groups of bondholders is prepared to discuss constructively with Argentina when its government is ready to do so, with the common goal of finding a viable solution to the Republic's current financial challenges.
”The statement, which is known four days before the closing of the offer - scheduled for Friday, May 8 - puts the Government before the dilemma of making the proposal more flexible or assuming that the country will inexorably go to a new default. The rejection of these groups of creditors would make it impossible for the Government to reach a percentage of accession that would allow it to complete the swap.
Until now, the position of the Argentine Government is that the offer presented is the maximum possible effort that can be made within the criteria of "sustainability", that is, that an offer is being made that can be fulfilled during the entire term of the new bonds . In this sense, the position of Minister Martín Guzmán is to offer more, is to run the certain risk that Argentina will default again in some years.
Guzmán leans on an IMF report that says that in these conditions the debt is unsustainable and that substantial savings (of the order of 50,000 million dollars) are needed to regain the sustainability of the debt.
The timing of the negotiation is demanding. On May 8 the proposal is closed and if Argentina does not reach certain majorities in the percentages of accession of each series of bonds (the so-called Collective Action Clauses), the creditors will be in a position to declare default. All in all, the litmus test is May 22, when the 30-day extension expires to pay three global bond coupons totaling $ 503 million.