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Argentina faces off with bondholders as $65 billion debt deadline looms

Marc Jones, Karin Strohecker and Adam Jourdan

By Marc Jones, Karin Strohecker and Adam Jourdan

LONDON/BUENOS AIRES (Reuters) - Argentina's government and its biggest bondholders are at loggerheads over plans to restructure $65 billion in foreign debt, with no sign of either side budging in last-ditch talks to strike a deal.

Three major creditor groups on Monday reiterated their stance that they would reject a tough offer the government made last month. The offer's deadline is Friday and the government has hardened its position that the current restructuring deal is the only way to avert a full-blown debt crisis.

The negotiations, which have hammered Argentine bonds, will determine whether the country is able to avoid slipping into what would be its ninth default, damaging access to global markets as it struggles to escape from a painful recession.

Argentina's offer included a three-year halt on payments on the bonds, a 62% reduction in coupon payments and maturities pushed back to 2030 and beyond.

The bondholders, who have previously rebuffed the proposal, said they would not tender their bonds in the current offer, though were willing to work with Argentina's government when it was ready to do so.

"(Creditors) consider the terms to require Argentine bondholders to bear disproportionate losses that are neither justified or necessary," the three creditor groups said in a statement.

The groups include names like BlackRock, Fidelity, Ashmore and hedge funds Greylock Capital, HBK and Pharo Management.

Argentine bonds, which are already trading at distressed levels between 20-35 cents, fell an average 2.7% on Monday.

The standoff is raising the risk Argentina will fall into a sovereign debt default on May 22, when the grace period on a $500 million missed interest payment runs out.

Santiago Cafiero, Argentina's cabinet chief, told local radio station La Red on Monday the country's offer to creditors would not be modified because it was "the commitment that we can fulfil and that will be sustainable over time."

Economy Minister Martin Guzman wrote in an opinion piece in the Financial Times on Sunday that Argentina cannot afford to pay creditors more, especially with the coronavirus now devastating exports and fiscal revenues.

He noted the country had "defaulted on its debt eight times, suffered hyperinflation twice, and gone through multiple balance of payments crises as well as 20 IMF-supported economic programmes in 60 years."

"In the new COVID-19 world, we cannot continue to spend 20% of government revenues or more on debt payments — as some creditors have effectively asked. It is simply impossible," Guzman said, adding "the time for illusions is over."

The current offer leaves creditors with an average bond coupon of 2.3%, compared with their 7% average now. Analysts have calculated the net present value - a key metric for creditors - at around 30-35 cents on the dollar.

One of the three main bondholder groups currently formed includes AllianceBernstein, Amundi, Ashmore, BlackRock, BlueBay, Fidelity and T. Rowe Price.

Another, the Argentina Creditor Committee, includes distressed debt specialist Greylock Capital, as well as mutual funds, family offices, insurance firms and asset managers. The Exchange Bondholder Group, which holds over $4 billion of bonds, has hedge funds HBK Capital Management, Monarch Alternative Capital and Pharo Management among its members.


(Reporting by Marc Jones and Karin Strohecker in London and Adam Jourdan in Buenos Aires, editing by Larry King, Dan Grebler and Tom Brown)