Investors await final US approval to find out what incentives there will be to enter the debt swap


Creditors are still waiting for the United States Securities Commission (SEC) to approve the Argentine offer for the swap to begin and they believe that the process will take longer than expected by Economy Minister Martín Guzmán.

Official sources indicated to Infobae that the approval of the prospect remains – days or weeks could pass – with the offer whose guidelines have already transpired.

Only there will the bondholders know the formal proposal and will be able to evaluate whether they accept it or not, beyond the preliminary rejection that the three creditors’ committees have unanimously expressed in the last hours when considering that the Government did not negotiate “in good faith”.

Once the SEC – and its European counterpart – give the prospect a go-ahead, the 20-day period that Minister Guzmán set for the swap to begin will begin.

Anyway, experts in debt negotiation clarified that That term would be insufficient, since the call to the assemblies for the creditors to vote if they agree with the change in terms and conditions demands 30 days..

Therefore, unless this period is shortened, the negotiation will last until the end of May or the beginning of June.

By then, the grace period set for the payment of the global bond that expires tomorrow and that has 30 days before falling into default will have passed.

And although the thick lines of the offer have already been known, the creditors want to know some not minor details. For example, if there will be a specific incentive to enter the swap or wait. Official sources assured Infobae that there will be a mechanism with this objective, but did not provide details.

The only clue that he placed in the 18K document in this regard is the one that indicates that the creditor who does not accept this offer could receive a worse one in the future. In fact, in the past, a tool of this style was used (the RUFO clause) to prevent the country from improving the offer of swaps in 2005 and 2010.

Also, they are expected to be used the exit clauses (exit consents) that allows most bondholders to change the terms of a bond without the holdouts being able to block modifications.

In the same sense, collective action clauses (CACs) operate, which, it should be clarified, require a certain majority to activate and achieve the same goal: that the holdouts cannot stop an agreement.

At once, experts in legal matters hope that the Government does not make the mistake of promoting a “Bolt Law” again, like the one voted in the exchanges 2005 and 2010, which was the central legal argument that investment funds used to win their cases in New York, beyond the lack of willingness to pay.

Approach proposals

In financial terms, hours after the offer was known, the EcoGo study explained that “even when the offer was discounted to one exit yield 12% looks unappealing to reach a deal, If the government shows a willingness to negotiate to make the sustainability objective more flexible, there is scope to take the proposal presented as a starting point to bring positions closer

“Any potential for improvement in the present value of the proposal seems to fall on the flow of the proposal rather than on the exit yield“Clarified the study he directs Marina Dal Poggetto.

In this sense, the options could be:

-Consider the payment of the running interest of the bonds to be exchanged (price clean versus price dirty).

-Incorporate a derivative as a “sweetener”, such as the PBI Coupon, although in this case it would probably require a credible short-term trigger for the market to assign a valuation that allows it to reach a deal.

-Improve exchange parity.

-Incorporate an additional bond that capitalizes a part of the coupon during the grace period.

On the same line, the ACM consultancy that founded Javier Alvaredo He indicated that “in order to bring positions closer, the Government could gradually include modifications that could improve the value of the offer.”

“The initial condition of non-payment of relevant financial flows during the first 3 years of the proposal leaves room for an improvement in that section of the offer, which, in turn, in light of the exit yield involved, it would have a direct impact on the value of the proposal, ”he explained.

In addition to the next expiration of the coupons of the BIRAD 2021, 2026 and 2046 bonds issued to cancel the debt with the holdouts“Developments on the forefront of the international financial architecture that are already underway will appear in the near future, such as the initiative of the IMF, other international organizations and renowned economists, who raise the need to put an umbrella to relieve the debt of the countries emerging ”.

“In our opinion the proposal presented by the authorities represents a starting point to start negotiations. Although, in light of the parameters presented, it is perceived that the offer lacks a solid appeal, the distance from what a priori is acceptable is not so far and such improvement could be generated from interest payments for first years ”, he clarified.

These payments “They would not generate a very strong pressure on public accounts (0.5% of GDP), and that at the same time could be financed with resources provided by multilateral organizations,” concluded ACM.