BUENOS AIRES (Reuters) – Argentina’s Economy Minister said on Tuesday that the fate of a $65 billion debt restructuring deal was now in the hands of creditors, though he expected opposition from a key bondholder group after the government unveiled its “final” offer.
The South American country formalized the offer with the U.S. Securities and Exchange Commission overnight and all eyes have turned to a key bloc of creditors including names like BlackRock and Fidelity, which has so far stayed silent.
The new government offer, which improved payment terms and ceded ground on disputed legal terms, drew early support from some creditors on Monday, helping propel sovereign bonds up 4% on hopes a deal could be struck.
However, the major Ad Hoc and Exchange bondholder groups, which combined hold around $21 billion of the total eligible debt and could obstruct any deal, have notably held off from supporting or rejecting the proposal.
Economy Minister Martin Guzman told local radio on Tuesday that he expected that the Ad Hoc group would oppose the deal, at least initially, though he added that the government had the “support of an important part of the market”.
“We expect that there will shortly be a statement against it and that then they will take some time to decide,” Guzman told local Radio Con Vos, adding the government would consider closing a deal with “part” of its creditors.
“This is the final offer,” he added. “The decision is now with the creditors.”
Argentine bonds climbed 0.8% on average on Tuesday, after having edged down earlier in the day.
‘BY NO MEANS A DONE DEAL’
Morgan Stanley said that despite the improved offer, reaching an agreement was “by no means a done deal” with a gap of 4-5 points still between the proposal and some creditors’ demands. The investment bank cut its bullish stance to neutral.
“Deal risk stems from the new offer not being agreed to by creditors before being presented and Argentina unlikely to improve the offer for now,” it added.
Argentina’s negotiations with creditors had stalled in June after edging close to an agreement, with the main issues being with the two groups, which slammed the talks as having failed and later criticized the government for a lack of engagement.
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.
In the full prospectus, filed overnight with the SEC and in Argentina’s official gazette, the government added some details on the offer, including on minimum participation thresholds.
It said that the offer would go ahead only if it received support by an Aug. 4 deadline from holders of 66.6% of the total eligible bonds, or levels between 50%-60% if 2005 and 2016 bond indentures were taken independently.
The offer, if successful, would be settled on Sept. 4.
The International Monetary Fund, a key backer to Argentina, said in a statement that the country’s amended debt offer was an “important step” and hoped both sides could work constructively and quickly toward an agreement.
(Reporting by Adam Jourdan, Nicolas Misculin; Additional reporting by Cassandra Garrison, Hernan Nessi, Jorge Otaola, Walter Bianchi and Marc Jones in London; Editing by Chizu Nomiyama, Alistair Bell and Jonathan Oatis)
