Argentina’s day of reckoning arrives as creditors decide on $65 billion debt deal

FILE PHOTO: Argentine Economy Minister Martin Guzman gestures during an interview with Reuters, in Buenos Aires, Argentina

Argentina’s day of reckoning has arrived.

After four months of tense debt talks, multiple pushed deadlines and amendments since an initial low-ball offer in April, bondholders will decide on Friday whether to accept the country’s $65 billion restructuring proposal.

The main three creditor committees holding a large chunk of the bonds backed a deal earlier this month, bolstering confidence that the government will get the required level of support to allow a full deal to go ahead without holdouts.

A deal is key to pulling Argentina out of default and reviving the country already in its third straight year of recession as Economy Minister Martin Guzman turns his attention to the next step: renegotiating a failed $57 billion deal with the International Monetary Fund.

“After circling around each other for the better part of 2020, we have finally reached ‘D-Day’,” said Patrick Esteruelas, head of research for Emso Asset Management in New York.

He added it was “highly unlikely” that legal thresholds on the bonds needed for a deal would not be reached. Collective action clauses mean the government needs holders of between 66.67%-85% of eligible bonds depending on the bond series.

A person with direct knowledge of the negotiations told us that already the “participation is very good”, though the final result would only be known on Friday.

The restructuring invitation expires at 5 p.m. Eastern Time (2100 GMT) unless further extended. The new bonds are scheduled to be issued on Sept. 4 if a deal is struck.

Argentina’s government made a breakthrough with its main creditor groups – the Ad Hoc Group, Argentina Creditor Committee and the Exchange Bondholder Group – on Aug. 4, when all three agreed to support an amended offer.

The bonds include so-called “Exchange” bonds, involved in a previous restructuring, and which have tougher legal clauses. The other “Macri” bonds were issued during the previous administration of conservative President Mauricio Macri.

Argentina needs support from holders of 85% of the Exchange bonds, and between 66.67%-75% on the Macri bonds, though individual bond series can have lower levels of support.

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