Argentina will extend a deadline for $65 billion debt restructuring talks by more than a month, the country’s economy ministry said late on Friday, after negotiations with creditors stalled this week leaving a deal hanging in the balance.
FILE PHOTO: A pedestrian wearing a protective face mask walks past posters on the street that read "No to the payment of the debt. Break with the IMF", in Buenos Aires, Argentina May 27, 2020. REUTERS/Agustin Marcarian/File PhotoThe extension to July 24 comes with creditors and the government at an impasse, with one bondholder group slamming the negotiations this week as a “failure”. Reuters reported that the Friday deadline would be pushed back.
The delay gives breathing room for the two sides to defuse tensions and bridge the remaining divide after having made significant progress over recent months.
The South American grains producer, long a boom-and-bust economy that in May defaulted for a ninth time, has twice improved a proposal to revamp its foreign debt. A deal is key to averting a long and messy legal standoff.
“We are going to pick ourselves up and we are going to find an agreement,” center-left Peronist President Alberto Fernandez, who took office last December, said in a radio broadcast on Friday, adding he was “confident” a deal could be reached.
Creditor groups are demanding Argentina improve the offer further, while the government stance is that it cannot cede ground after raising its proposal to around 50 cents on the dollar, plus an additional export-linked sweetener.
Two of the main groups said in a statement on Friday they remained ready to engage constructively with Argentina, though were disappointed with the government’s decision to “terminate dialogue” with creditors.
Despite the tensions, the two sides should eventually be able to reach a deal, analysts said.
“While it would have been better that negotiations continued with more constructive statements, this is not the first time the restructuring would seem to be at an impasse,” Morgan Stanley said in a note.
It said that at a 10% exit yield, the government’s offer was worth around 49.7 cents, while the most aggressive counter from two groups, including names like BlackRock, Fidelity and AllianceBernstein, was worth around 57 cents.
“At less than 8 points difference, it would not benefit either side to completely break away from negotiations,” the investment bank said, adding it stuck by its view that a deal would be reached in the third quarter of the year.
‘DANCING AROUND A DEAL’ Goldman Sachs said while risks had risen, the two sides may ultimately find a way to bridge a gap it calculated at 5 cents and “avoid a disorderly and contentious default.”
The country’s over-the-counter bonds rose on average 1.2% on Friday after losing ground a day earlier.
Argentina’s government now faces bond repayments looming at the end of the month that have a 30-day grace period. It defaulted on three interest payments in May.
Siobhan Morden at Amherst Pierpont said in a note the options appeared to be returning to talks or using coercive tactics to force a resolution, adding that “both sides lose from a protracted impasse or unresolved debt crisis.”
“Dialogue is still open, but it is very challenging,” said a source familiar with the government’s thinking.
FILE PHOTO: Demonstrators hold a banner that reads "no to foreign debt payment, IMF out" as they march towards Casa Rosada Presidential Palace during a protest against the visit of an IMF technical team to Buenos Aires, in Buenos Aires, Argentina, February 12, 2020. EUTERS/Agustin Marcarian/File Photo“Creditors do not yet realize that the government has reached the absolute limit of what they are able to offer.”
A bondholder with knowledge of the negotiations said the two sides seemed to be skirting around a deal.
“It’s like we’re sort of dancing around it. It’s a game, they are treating this like a continuation of a poker game that they want to keep playing,” he said.