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Debt: the Government will pay an extra to the bondholders who adhere to the exchange

2020-07-06T13:04:49.783Z


This is a differential for those who choose to enter. There are others who will end up entering forced by the majority and will not receive that plus.


Mary Church

07/05/2020 - 17:10

  • Clarín.com
  • Economy
  • Economy

The government is working to finalize the formal details of the presentation of the new offer for private debt creditors and which will be the one that will be formalized before the United States Securities Commission (SEC).

As Clarín anticipated , the offer will be valid until the end of August, President Alberto Fernández confirmed in statements to FM Milenium radio.

The economic and legal details of the new offer are now closed. As this newspaper could know, there is a novelty that tries to act as a carrot in the structure that the Martín Guzmán team put together. With the intention of achieving greater adherence, an “extra” will be paid to the bondholders who enter the exchange , so these debt holders will receive a higher net present value than the rest will do.

As there are collective action clauses (CAC), known as “antibuitres”, there are minimum adherence percentages for each of the series of bonds. Once these thresholds are reached, the rest of the bondholders are required to enter the operation and must, therefore, exchange their securities for the new ones offered.

Thus, among the bondholders there will be two groups: those who express their intention to participate in the exchange and those who do not. The former will receive a higher value paper of around $ 53.5 per 100 , while those in the second group will not have the "extra bonus" and therefore will receive a value of $ 52.2.

However, so that the exchange that Argentina is carrying out is implemented, the Government will also set a minimum acceptance threshold at the general level (this is, the one that arises from the sum of all the bonds). That is, the country imposes itself to reach a certain percentage of acceptance of the proposal for the total of the bonds.

The number of this percentage was being finalized in the Government, but according to sources with knowledge of the negotiation, it will be below what the CAC establishes ( around 66% ).

In turn, the floor they were evaluating will arise from achieving a number that ensures that, once the operation is completed, there is a sufficient number of new bonds in circulation greater than those that are not exchanged.

By incorporating the minimum acceptance threshold, the Government adds a condiment that has a double edge: the fact of having a carrot (consent fee, as it is known in English) with which it seeks to attract bondholders, but in turn it now imposes complying with a percentage of acceptance of the offer , a point that until now was not.

Once the accessions are received, the Martín Guzmán team must identify who accepted the exchange and who did not and, based on this, will pay with titles at a higher or lower value, as appropriate.

When the “minimum acceptance threshold” is added to the structure of the offer, the “Pacman strategy” promoted by the Government is attenuated.

According to this strategy, which was resisted by some groups of creditors, Argentina was going to be able to leave out some series of bonds, thus giving the possibility of closing partial swaps.

It is that having to reach the majority of some series and also reach the minimum acceptance threshold, the possibility of making use of this strategy is limited, something that was criticized by some sectors but at the same time novel in financial architecture.

In this chapter of the debt negotiations, Argentina seeks to restructure bonds under foreign legislation for US $ 64.8 billion.

But this is not the only “leg” of the matter: in addition there is the debt also in dollars but under local legislation and the maturities with the International Monetary Fund.

Source: clarin

All business articles on 2020-07-06

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