FILE PHOTO: Argentine Economy Minister Martin Guzman reacts during an interview with Reuters, in Buenos Aires, Argentina March 11, 2020. REUTERS/Agustin Marcarian
July 8, 2020
By Walter Bianchi and Adam Jourdan
BUENOS AIRES (Reuters) – Argentine over-the-counter bonds climbed 1% on average on Wednesday, extending their rise since the government unveiled a sweetened debt restructuring offer on Sunday, which has raised hopes that the country could win creditors over to a deal.
The new and “final” offer, which improved payment terms and ceded ground on disputed legal terms, drew early support from some creditors, while other key bondholder blocs which had clashed with the government have remained quiet.
“The bottom line is that it’s going to be difficult for bondholders to reject a reasonable offer,” said Siobhan Morden at Amherst Pierpont, noting that creditor groups could be “splintering” as members take different views.
“The high risk strategy of litigation is typically an alternative for activist funds; however, real money investors may come under increasing pressure to accept these final terms.”
A deal is key for Argentina to avoid a damaging legal standoff with creditors. The country defaulted for a ninth time in May and is headed for an estimated 12% economic contraction this year on the back of two straight years of recession.
Negotiations with creditors had stalled in June after edging close to an agreement, with the main issues being with two large creditor groups which slammed the talks as having failed and criticized the government for a lack of engagement.
Argentina’s economy minister said on Tuesday the fate of the $65 billion deal was in the hands of creditors.
A person close to the government with knowledge of the talks said he was “cautiously optimistic,” and reiterated that the offer was as far as the recession-hit country could go without risking its ability to deliver the final deal.
Advisers are trying to explain the offer and convince bondholders to get on board by an Aug. 4 deadline, he added.
(Reporting by Walter Bianchi in Buenos Aires and Adam Jourdan; Additional reporting by Karin Strohecker in London and Hernan Nessi in Buenos Aires; Writing by Hugh Bronstein; Editing by Matthew Lewis and Richard Chang)
