Exchange: the Government seeks to approach bondholders and on Monday will improve the offer

07/03/2020 - 22:36

• Clarín.com
• Economy
• Economy

Almost two and a half months after he presented the offer to the New York SEC (Wall Street Securities Commission) and failed in his attempt to gather the majority to exchange bonds for US $ 64.8 billion, on Monday the Government is preparing to amend the proposal that was almost provocative for the market: it had less than 15% adherence.

The proposal that Martín Guzmán , Minister of Economy and connoisseur of the history of debt restructuring, will present now will mean putting about $ 10 billion more on the table than the current offer in terms of present value . Thus, in this way, this time it will aim to achieve at least 50% acceptance of the bondholders to the exchange. The exact degree of adherence to the original offer was never known because for this to occur, the exchange must be closed. Market sources indicated that acceptance was not more than 15%. In the 2005 exchange, acceptance reached 76%.

According to members of the Government, the present value of this Monday's proposal would be around 53 cents for every dollar. The one offered on April 20 was worth about 35 cents. Guzmán will put US $ 10 billion on the table.

On the side of the strongest bondholders, although the first proposals for those funds were around 90 cents and then dropped to 60 cents, the claims of BlackRock , Ashmore and other funds still prevent the Government from gathering a majority that allows them change the clauses of the contracts without the country running the risk of being sued in New York.

The offer that Guzmán presented in April aims to replace US $ 64.6 billion of foreign debt in foreign currency and issued abroad with five bonds that mature between 2030 and 2047, with a three-year grace period (without paying interest), a 62% drop in coupons and a withdrawal of 5.4% of the principal, on average. The new details will be released on Monday. In the two and a half months, two more proposals were known that the minister put on the table but they have not yet been sufficient.

The Argentine Creditors Committee presented an offer on Wednesday that boasts of being compatible "with the objectives of Argentina." Among the axes it draws it represents a relief of cash flow for Argentina of US $ 39,000 million until 2028. This group of holders is the one that is close to the Government's position. Officials insist that the strongest bondholders are those of Ad Hoc (BlackRock and Ashmore) and the Exchange Bondholders .

Argentina, in this first stage, seeks to restructure the debt in dollars issued under international law. They are about $ 64.8 billion. According to private estimates, the three committees would represent 40% of that total. There are other large funds that are not on the committees like Pimco and Prudential . For the Government, the party is played with minorities, which can be about US $ 15,000 million.

One of the alternatives that was put on the table and the Government is evaluating is to establish a minimum percentage of acceptance to enable the exchange or not. This means that if there are retail investors who doubt or prefer not to enter the offer in order not to be in the minority, this tool would encourage them to do so knowing in advance that they can be lowered if accession did not reach a certain threshold. It is a mechanism that has already been used in other debt swaps.

The Argentine Creditors Committee included in the latest proposal a novelty: that Guzmán can redesign the series to calculate the majorities only if he obtains 66% or more of adherence to the exchange of the eligible debt . This threshold does not figure in Argentina's current proposal to the SEC and hence the toughest bondholders reject the proposal. 

The government extended the deadline to restructure until July 24. So then he will have been negotiating the offer for three months and with five extensions. Formal conversations with bondholders will take eight months.

The July 24 deadline is due to the fact that five days later the default could deepen with two more bonds (it is already in default with three titles): Discount and Centenario. This week you should have paid almost $ 100 million for the semi-annual 100-year Bond coupon issued in June 2017. And on Wednesday you had to have paid a larger maturity: $ 572 million to pay off an interest coupon (dollars and euros) of Discount bonds belonging to the 2005 debt swap.