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Argentina Gives Bondholders More Time To Consider Restructuring Offer, Insists on Debt ‘Sustainability’

May 12, 2020 (EIRNS)—Yesterday, the Argentine Finance Ministry announced it will extend until May 22 the deadline by which private bondholders must respond to the Fernández government’s offer to restructure $67 billion in debt, which includes a 62% reduction in interest payments, a 5.4% reduction in principal and a three-year moratorium on any debt payments. May 22 is also the end of the 30-day grace period granted the government after it failed on April 22 to make a $500 million interest payment on bonds. Should it fail again to make that payment or reach a deal with bondholders on that date, it will be declared in default.

Simultaneously, the government of the province of Buenos Aires, the country’s most populous, extended until May 26 the deadline by which bondholders must accept its proposal to restructure $7 billion in debt, with a 55% haircut on interest, a 7% reduction in principal and a three-year grace period.

Finance Minister Martín Guzmán has said the government is open to any bondholder counteroffer that is coherent with its plan to maintain the “sustainability” of the debt. That means no austerity demands or other conditionalities.

Three separate bondholder groups jointly rejected the government’s initial April 16 offer and are expected to make their counteroffer by May 14. According to the daily Ambito Financiero, they will likely include a proposal to eliminate the 5.4% haircut on principal, and reduce the grace period by one year, which the government cannot accept. It has already rejected a counterproposal by BlackRock that it termed completely “unrealistic” and “incompatible with the macroeconomic framework” outlined by government officials.

President Alberto Fernández has said he doesn’t want to default, but also warns that “if what [bondholders] seek is to break me, at the expense of the suffering of millions of Argentines, they won’t succeed,” the news agency Télam reported. His restructuring proposal has broad support across Argentina’s political spectrum, among governors, mayors, legislators and some business groupings all of whom agree that if Argentina can’t grow economically, it will have no means to pay anything. As Télam pointed out today, this is reminiscent of the late President Nestor Kirchner’s famous 2005 phrase, “the dead don’t pay.” And, as economist Hernan Letcher told Télam, this is taking place in the world of coronavirus, in which 40 to 50 countries easily are expected to default. Fernández himself described it as a world “turned upside down.”

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