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The keys to the improvement that Guzmán put on the table: higher coupons, lower removals and a 'sweetening' bonus

2020-05-29T17:15:41.749Z


According to market calculations, the value of the proposal would go from almost $ 40 in the original plan to about $ 45. BlackRock asks for it to be $ 53. The market was skeptical of a quick deal.


Ezequiel Burgo

05/29/2020 - 6:01

  • Clarín.com
  • Economy
  • Technology

The Ministry of Economy revealed on Thursday night the details of a new offer that was made to the bondholders between May 23 and 28. This is a new structure of the exchange offer , different from the one that had been presented in April and that had a very high rejection, which forced Argentina to extend the negotiation terms and, until now, avoid the traditional default, despite because there were already maturities that he did not pay. 

The statement explains that it was made "in compliance with the Republic's commitment and willingness to provide investors with opportunities to contribute to a successful debt restructuring, while continuing to preserve its debt sustainability goals . "

Martín Guzmán's proposal consists of six bonds instead of five, as was the initial plan. The securities mature a year earlier, with the exception of the bond to 2030 (but the capital reduction went from 12% to 7% in this title).

The main details of the offer that Economy revealed are the following:

- Bonds are offered in 2030, 2035, 2038, 2042 and 2046 . In the initial offering they were titles to 2030, 2036, 2039, 2043 and 2047.

- The grace period  falls one year: until 2022 no interest is paid.

- The reduction is less in the case of the shorter bond: it went from 12% to 7%.

- Coupons are higher in the case of the bond to 2035: they went from 3.8% to 4.8% from 2029. The same in the case of the three longest titles (which are the ones offered to holders of swap titles 2005).

- The payment of non-running interest is recognized with a bond to 2034 that pays 1% per year.

According to a calculation by the consulting firm Eco Go, this improved offer by Guzmán would be worth about $ 47 (the original one he presented in April was $ 40) . It is still far from BlackRock, the fund that toughest in the negotiations and that made a new proposal public ($ 53). Guzmán described it as being on the right track "but it is still insufficient." In Economics they admit that this fund is the main obstacle to reaching an agreement.

The Ministry of Economy clarified that the detailed proposal last night is not "an amendment to the invitation" , referring to the exchange offer in force before the SEC yet. It is a scenario that he put on the table, although the investors and analysts who follow the subject agree that it would be the closest thing to an offer.

In this way, Guzmán would seek to replace the foreign debt in foreign currency and issued abroad (about US $ 66,000 million), with six bonds to mature between 2030 and 2046 with a three-year grace period (without paying interest). The initial proposal involved a 62% drop in coupons and a 5.4% reduction in principal, on average. 

After rejecting Guzmán's original offer 20 days ago, BlackRock counter- offered Argentina a menu of six bonds that matured between 2027 and 2043, with an average coupon of 4.5% (Guzmán's was 2.3%) , pay interest from 2021 (the Argentine offer only in 2023) and without capital withdrawals. But even so the fund that Larry Fink leads continued without receiving the green light from the minister.

On Thursday, BlackRock resubmitted a new plan. Guzmán also rejected it. And after a while he presented the details of what could be, or approach, his final offer.

For all this, on Thursday the skepticism of reaching a quick agreement continued and the country risk rose. 



Source: clarin

All business articles on 2020-05-29

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