Argentina readies final debt restructuring offer to creditors

Argentina’s government is reading a final debt restructuring offer to creditors which could be formally sent to United States regulators within days, a government source told Reuters News Agency on Friday, even as increasingly splintered bondholders tabled another proposal of their own.

Argentina will present its new offer to the US Securities and Exchange Commission in the coming days, according to a government source. A day earlier, a source close to the negotiations said the government was “crafting the definitive and final offer” to creditors.

Meanwhile, a new counteroffer by bondholders, which Reuters reported had been tabled on Thursday, will provide the government with $39bn of cashflow relief over the next eight years, the Argentina Creditor Committee (ACC) said. It includes a requirement that two-thirds of bonds participate in any deal.

Debt specialists see the participation threshold as important. If the government did not accept it, they say it could signal an intention to adopt a so-called “Pac-Man’ strategy” whereby the government tries to get investors to deal with it one at a time.

“The ACC continues to believe that the best way forward is a consensual resolution,” the group said in a statement.

Sources on Thursday said that the new ACC offer valued bonds at about 54.5 cents on the dollar. That would be a modest drop from its previous offer of approximately 55-56 cents but would still be above the government’s last proposal of 50 cents plus sweeteners.

The ACC added that its offer would leave creditors with a weighted average coupon of 3.95 percent on their bonds with a 5 percent maximum. Eligible bonds would also maintain their original indentures – the contract associated with the bond – meaning they would not have inferior legal guarantees.

The move came at a crucial stage in the $65bn debt renegotiations with the Argentine government.

Talks have been extended a number of times in an effort to reach a deal, though the two biggest creditor groups, the “Ad Hoc” and “Exchange” groups, which hold a combined $21bn of the $65bn, have complained this week of lack of engagement from the government.

Sources familiar with the thinking of those two groups have told Reuters that they still want a better deal than the ACC proposal.

They also said if Argentina’s next offer is not up to scratch, they will have a so-called “lock up”, which would prevent any of the individual firms in the groups peeling off and accepting a deal if the government did try the Pac-Man approach.