July 9, 2020 / 11:39 AM / a month ago

Argentina debt deal hopes survive bondholder group blow

LONDON (Reuters) - Analysts kept faith that Argentina would be able strike a debt deal with its creditors on Thursday, after the most prominent group of funds had dismissed the government’s “final” offer as only a good starting point.

FILE PHOTO: Argentina's economy minister, Martin Guzman, speaks at Congress on the country's economic situation and debt plan ahead of the meetings with the International Monetary Fund officials who are traveling to the country, in Buenos Aires, Argentina February 12, 2020. REUTERS/Agustin Marcarian

The Ad Hoc and Exchange bondholder groups, which between them own almost a third of the $65 billion of debt Argentina wants to restructure, said that though they didn’t accept the latest proposal, it did provide a basis for “constructive engagement”.

Argentina’s Economy Minister Martin Guzman, who has led the negotiations, responded by saying there was “clearly” no room to improve the country’s “maximum effort”, but followers of the long-running saga weren’t giving up hope.

“I think they are getting closer to a deal and I think they will reach it,” said North Asset Management’s Peter Kisler, who holds Argentina bonds but is not part of any of creditor group.

“The creditors are trying to extract as much as they can. It doesn’t cost them anything to push for more especially as there is bit of time left,” he added, referring to Argentina’s latest offer being on the table until at least early August.

Bond prices have risen from around 20 cents on the dollar as negotiations have continued in recent months, but as they approach 50 cent on the dollar it could be time to think about potentially cashing in, Kisler said.

“They could go to 60 cents maybe but the risk-reward gets more difficult once you get above that (50 cents) level.”

Another of the bond groups, the Argentina Creditor Committee, which includes funds such as Greylock Capital and GMO is still to give its view, but most focus remains on the Ad Hoc and Exchange groups which contain the likes of BlackRock, Fidelity, Pimco and Ashmore.

Carlos de Sousa, Lead EM Economist, Oxford Economics told Reuters that bondholders still had concerns about a potential “Pac-Man” strategy where the government would try to gobble up bonds in successive restructurings rather than in one clean swoop.

“The discussion is not only about a few more cents on the dollar. That said, our debt sustainability analysis supports Argentina’s statements that the new offer is the country’s maximum effort,” de Sousa said.

“In the sense that, Argentina would risk falling again on an unsustainable debt path within a decade if they offer significantly more.”

Additional reporting by Karin Strohecker in London; Editing by Toby Chopra

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