May 4, 2020 / 12:04 PM / a month ago

Bondholders say Argentina debt offer would cause `disproportionate losses'

LONDON, May 4 (Reuters) - Argentina’s biggest bondholders reiterated on Monday that they would not accept the government’s offer to restructure $65 billion of its foreign debt, facing down Buenos Aires after it said it would not improve its proposal.

Creditor groups, which include BlackRock, Fidelity, Ashmore and hedge funds Greylock Capital, HBK and Pharo Management, said they wanted to “make clear” they would not support Argentina’s proposal for its interest payments to be delayed for three years and principal payments until 2026.

The groups said the terms required bondholders “to bear disproportionate losses that are neither justified nor necessary.”

The standoff is raising the risk Argentina will fall into a record ninth sovereign debt default on May 22, when a grace period on a missed interest payment runs out.

The country’s economy minister, Martin Guzman, wrote in an opinion piece in the Financial Times on Sunday that Argentina cannot afford to pay creditors more, especially with the coronavirus now devastating exports and fiscal revenues.

“In the new Covid-19 world, we cannot continue to spend 20% of government revenues or more on debt payments — as some creditors have effectively asked. It is simply impossible,” Guzman said, adding “the time for illusions is over”.

Argentina’s current offer includes a three-year grace period, a 5.5% reduction on the bonds’ principal and a 62% reduction of interest payments. It leaves creditors with an average bond coupon of 2.3%, compared with their current 7% average.

Three main bondholder groups have currently formed. One includes AllianceBernstein, Amundi, Ashmore, BlackRock, BlueBay, Fidelity and T. Rowe Price.

Another, the Argentina Creditor Committee, includes distressed debt specialist Greylock Capital as well as mutual funds, family offices, insurance firms and asset managers. The Exchange Bondholder Group, which holds over $4 billion of bonds, has hedge funds HBK Capital Management, Monarch Alternative Capital and Pharo Management among its members.

In their reiterated refusal of the offer on Monday, the bondholder groups said they were “each prepared to constructively engage with Argentina when its government is ready to do so, with the common objective of finding a viable solution to the Republic’s current financial challenges.” (Reporting by Marc Jones and Karin Strohecker, editing by Larry King)

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