Mary Church
07/13/2020 - 12:01
- Clarín.com
- Economy
- Economy
Negotiation for debt under foreign law, which includes bonds in the hands of private creditors for a total of US $ 64.8 billion, can lead to different results.
The possibilities range from a successful swap, which would be the ideal but complex to achieve for the required percentages, going through another option that would be "suboptimal" , as rated by investment bank Morgan Stanley, to the two alternatives in which it did not an agreement is reached and default occurs.
Some modifications introduced in the latest offer filed with the United States Securities Commission (SEC) lead to possible scenarios looking "a little more direct," Morgan Stanley specified in a recent report. .
Specifically, it refers to the introduction of the “minimum threshold” of participation required for there to be an exchange. And, in that line, it is asked whether reaching the percentage for the operation to be activated also implies reaching the percentages established in the collective action clauses (CAC), known as “antibuitres”.
According to these clauses, 66.6% of the total to be exchanged, plus 50% of each of the series of instruments , must be reached for the securities issued from 2016 to this part (known as “M bonds”). exchanged.
In a slightly less strict percentage, for the “K bonds” (which are the ones placed in the previous exchanges, in 2005 and 2010), it should reach 85% in the total and 66.6% of each of the series.
Taking these aspects into account, Morgan Stanley identifies four possible scenarios:
- If the CACs are reached: as described by the investment bank (and without a doubt it would be so), this would be the best result for Argentina, “especially if the CACs are reached in all the bonds, since it would completely avoid the holdouts and, therefore, it would avoid future lawsuits. " In this case, not only would any possible presentation before the New York court, by Loretta Preska (successor to Thomas Griesa), be avoided, but they also highlight in the MS that it would be the only option in which the performance of the titles Argentina may drop below 10%.
- If the CACs are not reached: it is the option that is most shuffled today among analysts , and which was not ruled out by the Government, which implies closing a partial agreement, with a sufficient majority so that the market that remains in force is the most possible liquid. "In this scenario there could be a large part of the holdouts, that is, up to 33.3% of the total", they detail in MS and define it as a "suboptimal scenario for Argentina", with the country's objective of convincing a higher proportion of creditors to finally join the offer. However, they warn that the risk is that it will not progress and it becomes a legal confrontation of several years, "as it happened after 2005," they recall. The legal factor would not be the only implication: yields are likely to be higher and remain around 12% due to uncertainty, they add.
- The "minimum threshold" has not been reached, but the negotiations continue: it would be better if the talks continue and that Argentina is willing to improve the offer again, "perhaps boosting payments in the short term or returning to the idea of a sweetener in the form of a value recovery instrument ”, mentions the investment bank. "In turn, getting creditor groups to agree on a proposal before launch would significantly increase the chances of success," he adds. In this scenario, the prices of the bonds are likely to drop between 30 and 35. They also evaluate in the investment bank that, alternatively, it could be postponed the negotiation "until there is more clarity on the economic outlook, perhaps until early 2021. "
- The worst result: it would happen if a complete rupture occurs between the two parties , with little margin for the negotiations to resume again. "Although less likely, this would see Argentina declare categorically that it no longer makes sense to negotiate while creditors also seek to accelerate their bonds and begin legal proceedings," identify Morgan Morgan. Thus, the bonds would likely fall to a value of about $ 20.
