July 20, 2020 / 9:34 PM / 18 days ago

Argentina creditors close ranks over debt deal as government digs in

BUENOS AIRES/LONDON (Reuters) - Argentina’s government rejected a counterproposal from the country’s three main creditor groups on Monday to revamp around $65 billion in foreign debt, doubling down on its own “final” offer as bondholders appeared to close ranks.

FILE PHOTO: Argentina's economy minister, Martin Guzman, speaks at Congress on the country's economic situation and debt plan ahead of the meetings with the International Monetary Fund officials who are traveling to the country, in Buenos Aires, Argentina February 12, 2020. REUTERS/Agustin Marcarian/File Photo/File Photo

Economy Minister Martin Guzman said the latest debt restructuring offer, the first from the three groups together, reflected a “lack of understanding” of the limitations faced by the crisis-stricken South American nation.

“Accepting what some creditors ask for would mean subjecting Argentine society to more anguish,” Guzman said in a statement. “It would imply, for example, adjusting pensions, and we will not do it.”

The two sides are trying to reach an agreement to restructure around $65 billion in foreign debt before a government-set deadline of Aug. 4, looking to avoid a messy and protracted legal standoff after recession-hit Argentina slipped into default in May.

Argentina’s government made a “final” offer in July after talks broke down. Center-left President Alberto Fernandez and Guzman have since repeatedly said it was the maximum the country could offer.

The three groups — the Ad Hoc group, Argentina Creditor Committee and Exchange Bondholder Group — said their proposal, issued earlier on Monday, made “significant economic and legal concessions.” They all agreed to oppose the government offer.

“Our three groups have also signed a cooperation agreement reaffirming that Argentina’s current offer falls short of a proposal that can be supported by the creditor groups,” they said, adding they would not tender their bonds under the offer.

The new creditor proposal puts the weighted average of the net present value (NPV) at 55.70 cents, according to a presentation seen by Reuters. Analysts had calculated the NPV of the government offer at 53-54 cents.

The unified opposition from the groups, which together hold more than a third of both Argentina’s “global” bonds and its “Exchange” bonds, will make it tough for the government to get a comprehensive deal on its current offer.

The groups added, however, that a deal could still be struck.

“We are confident that a consensual resolution is in sight and that such an agreement will provide a path towards a sustainable economic future for Argentina’s people,” they said.

The three groups said their new proposal included an “amended version of the 2016 indenture” for eligible global bonds, a reference to the key legal clauses that have been a point of contention.

Guzman reiterated the government’s offer was its “maximum effort” and he believed that most creditors would accept it.

Hans Humes, CEO of Greylock Capital, which was one of the prominent voices in the ACC committee before it exited the group and tendered its bonds, said there was a risk that some were misreading the reality of the Argentine situation.

“We may have been able to get concessions on legal language and adviser fees,” the distressed debt veteran said. “But not the net present value (NPV) that Argentina has said no to many times.”

The country’s sovereign bonds, which have been buffeted since last year over concerns of a default, edged down 0.5% in on Monday. They have risen over recent months on hopes of a deal.

“We suspect we are getting closer to a deal,” analysts at Morgan Stanley said after seeing the groups combine and their new offer.

“Having walked a long - and winding - road to get to where we are today, it would be surprising to see the parties becoming inflexible now.”

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Argentina creditors counter proposal - tmsnrt.rs/2BiwLoV

FILE PHOTO: The facade of Argentina's Central Bank is seen with scaffolding, during the coronavirus disease (COVID-19) outbrake, in Buenos Aires, Argentina May 21, 2020. REUTERS/Agustin Marcarian

Argentina creditors counter proposal - tmsnrt.rs/3jjrkqO

Argentina creditors counter proposal - tmsnrt.rs/30BnEIo

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Reporting by Adam Jourdan and Karin Strohecker; additional reporting by Cassandra Garrison, Jorge Otaola and Rodrigo Campos in New York and Marc Jones in London; Editing by Catherine Evans

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