Argentina and creditors at loggerheads over take it or leave it offer

Some of Argentina’s key creditors are rejecting invitations to speak with the nation’s finance team this week as both sides jockey for more favourable terms in a US$65-billion debt restructuring.

Tensions are building as the clock counts down on two key deadlines: May 8 for a debt-exchange offer and May 22, when a 30-day grace period for coupon payments on dollar bonds maturing in 2021, 2026 and 2046 expires. To close a deal, President Alberto Fernández's government needs support from creditors owning at least two-thirds of the aggregate holdings. It seems to be far from that threshold.

Relations are so tense that most large bondholders have even refused to attend video calls with Economy Minister Martín Guzmán, according to people familiar with the matter, who requested anonymity because the talks are private. They cite Guzmán’s comments that the debt offer is non-negotiable and concerns that exposure to confidential information would prohibit them from trading in the nation’s debt until the details were made public.

Other creditors plan to talk with government officials, including Guzmán, Finance Secretary Diego Bastourre and debt unit head Lisandro Cleri later this week, the people said.

“Guzmán is betting many will cave in,” Daniel Kerner and Ana Abad, analysts at Eurasia Group, wrote in a note. “If some or most majorities are not met, the government will stop paying.”

The Economy Ministry press office didn’t respond to requests for comment.

Bondholders in each of the three main creditor groups are looking at their litigation options if Argentina defaults for a ninth time next month, people familiar with the matter said. That could set the stage for an even messier legal battle than the nation’s last debt drama from 2001 to 2016. That showdown dragged on after a 2005 restructuring when a minority of holdout creditors pushed for better terms. This time, a large subset may reject the country’s offer.

Still, President Fernández’s administration is betting that some investors will buckle and accept the deal to protect their other investments in the nation’s provinces, companies and commodities. On Monday, Guzmán told TV Pública that Argentina will continue talks “in good faith, presenting the proposal that was already presented but discussing some details.”

In the end, Guzmán probably won’t overhaul the offer, meaning bondholders will reject the deal, according to Siobhan Morden, the New York-based head of Latin America fixed income strategy at Amherst Pierpont Securities.

“Hard default still seems like the base case,” she said.