Debt: the closest deal with a down payment tied to country risk

Daniel Fernández Canedo

06/20/2020 - 16:02

• Clarín.com
• Economy
• Economy

Since taking office, Alberto Fernández has put debt with private creditors as the main economic challenge to be solved. And that is why financial operators are betting that the Government will avoid signing the ninth total default of the Argentine State.

On April 22, Minister Martín Guzmán presented the formal proposal to holders of bonds with foreign legislation for US $ 66,238 million, which contemplated not paying interest for three years, a small capital drawdown and an interest cut over the years by US $ 41,500 million.

That proposal, which started with a net present value of the titles of the order of US $ 39 for each sheet of US $ 100, was rejected by the creditors at the point to the point that the Government never disclosed the percentage of adherence for low That resulted.

Since April, the Government has raised the proposed value of the bonds from US $ 39 to US $ 50 (each added dollar would be an additional US $ 1.3 billion) and the possibility of a cash payment linked to the lowering of the country risk was added, leaving on the other hand, a bond tied to grain exports or to GDP (like the one in 2005) as compensation for the years that the Government will try not to pay interest, which, according to the versions, would be two and not three.

On the other hand, the creditors (three groups of bondholders with different interests) were lowering their original claims until these days they reached the greatest distance from the BlackRock fund at US $ 56.50, from where, as they let it be known, they would not be willing to give.

The negotiation continues and the Government, meanwhile, has put aside the possibility of presenting a new proposal to the US commission. that acts as guarantor of the debt swaps (Security Exchange Commission, SEC) by requesting more time to negotiate with a large group of bondholders that would keep it from falling into total default.

Markets gambled on Friday in favor of the agreement with increases of 8% on the stock market and 6% on average in bonds, leaving behind the fall due to the blows of the possible expropriation of Vicentin and the departure of LAN from Argentina. The operators read that Alberto Fernández was refusing to present a new proposal in the SEC, betting on achieving a minimum "critical mass" of adherence to face-to-face conversations or, better said, zoom to zoom.

Inside and outside the government, it is said that, at this point, Martín Guzmán will try more intensely "to build a debtor case in good faith" than to seek a total solution to the problem, since he discovers that there will be bondholders outside the possible agreement.

Hand in hand with the IMF and the friendliest creditors , the Government could stretch the offer to the maximum (up to 54 or 55 dollars adding proposal and "sweeteners"?) To make it clear that it fulfilled its commitments during the first four-month period and from there play their luck at an accession level of the order of 50% of the debt in question.

If of the US $ 66,000 million, Guzmán reached an agreement in half and added to the reprogramming of the debt with local legislation, the Government could "sell" having obtained 75% accession to renegotiate US $ 130,000 million of total private debt.

Perhaps it could be argued that this level of adherence, although with cosmetics, would be greater than 66% of the time of Roberto Lavagna and Guillermo Nielsen . Does politics think so? The imagination is abundant in the leaders.

Presenting the new proposal or opening another negotiation period, the concrete thing is that the time to define is over. Clearing some key doubts is essential to think that Argentina can leave behind the stagnation fatigue it is in after nine years of not growing.

"Access to foreign currency financing to the private sector is key for many activities and for investment. Failure to resolve the debt restructuring would add more restrictions to the economy," says the latest Quantum report, Daniel's consultancy. Marx , an economist expert in debt negotiation who, on several occasions over the years, must have repeated the paragraph to alert about the loss of opportunities in the country.