Argentina Presents Final Offer To Restructure $66 Billion in Debt to U.S. Securities and Exchange Commission
July 6, 2020 (EIRNS)—In a press release issued last night, Argentina’s Finance Minister Martín Guzmán announced that he would be presenting to the U.S. Securities and Exchange Commission (SEC) today the government’s final offer to restructure $66 billion in debt. After almost three months of negotiations, this final proposal, which President Alberto Fernández says “is the maximum effort we can make,” includes some changes to the offer first made on April 21.
These include paying 53.5 cents on the dollar for new bonds, rather than the original 40 cents; reducing the “haircut” on principal from 5.4% to 1.9%, and begin making interest payments in 2021, rather than 2023. As reported by Página 12 July 5, Fernández said that “we hope creditors understand and that Argentine society understands as well that [for creditors] to ask us for more effort means failing to keep the promises we’ve made.”
Both the International Monetary Fund and the G20 reportedly support this final offer as coherent with a “sustainable debt” strategy, as do a number of bondholders grouped in the Argentine Creditors’ Committee. Belligerently rejecting it is financial predator BlackRock, which dominates the Ad Hoc Argentine Bondholder Group, and its ally the Exchange Bondholder Group. On June 20, the two issued a hostile statement accusing the Fernández government of “creating obstacles to a negotiated outcome,” and trying to “provoke division” among bondholders—divisions that in fact exist but not caused by Argentina. BlackRock CEO Larry Fink hasn’t hidden his dislike for Guzmán, which he has made known to U.S. Treasury Secretary Steve Mnuchin, urging him to intervene in the Argentine case on BlackRock’s behalf, and hopefully help to have Guzmán removed, Página 12 reported.
BlackRock’s problem? Argentina is the first of many developing-sector nations expected to default and have to restructure their debt. Thus, accepting Argentina’s offer without pushing for more concessions could set a “bad precedent," in BlackRock’s view. It demands that Argentina pay at least 60 cents on the dollar in restructured bonds while its ally, Ashmore, at the last minute demanded an upfront cash payment of $2.5 billion, according to Clarín columnist Marcelo Bonelli. Beyond that, BlackRock is angry that Argentina is including language in its Collective Action Clauses—known as “single limb” methodology—which makes it extremely costly for “holdouts”—vulture funds—to engage in extensive litigation. Bonds from the 2005 restructuring included clauses more favorable to vulture funds, and BlackRock demanded these be included in new bonds. Argentina’s reply was a loud “No.”