Government would not extend the swap but wants to avoid lawsuits


The alternative is to propose a standstill agreement that would freeze negotiations for 8 months. Bondholders may not accept or request silver in advance

The Government is debating during these hours how the relationship with creditors will continue after Tuesday, August 4. That date, which at one time was thought of as anecdotal, will be key since -for these hours- official sources assure that the debt swap will not be extended. That is, Alberto Fernández and Martín Guzmán they would virtually be making the decision to cancel the operation due to the “intransigence” of the large funds of Wall street. The Government, if it is confirmed that it will not give the bondholders more time, could even withdraw the offer before the National Securities Commission (SEC) because it will not have obtained the minimum participation required for the operation to run. In case that is the final decision, the lawyers that advise the country (Cleary Gottlieb Steen & Hamilton) would be working on plan B: proposing to creditors a standstill agreement.

That is, to negotiate an agreement by which the debt status is frozen for a certain period (no more than six or eight months) and in that period the country stops paying the debt (something it was already doing) but creditors refrain from recourse to justice to collect. A kind of impasse agreed. That same thing, but without saying it, Guzmán let it transcend in an interview with Page 12 raised the two alternatives in dance.

This offer that shows a great effort to close at that value, or that Argentina moves more towards the agreement with the IMF and later, in approximately six or eight months, rethink with the private sectors“, indicated the minister of Economy. Clear that this idea, not to deepen the default in which the country is, needs the approval of the creditors.

Investment banks believe that BlackRock and the other creditors would not accept a standstill

Creditors may reject invitation

Because, at the end of the day, the government can propose that to them, but the bondholders reject it and ask the country to pay more. For that, you need the big ones like BlackRock and others – who have 50% of the debt issued by Macri and 60% of the K bonds – want to accept that.

Usually a standstill it’s with cash in advance because you are asking them to wait for you to collect. In this case I do not see how the most important group of bondholders would accept this when the difference is minimal and the Government thinks that it cannot. I think it would be very conflictive and I don’t see them accepting“A source from Wall street who knows the creditors.

From another investment bank of Manhattan They affirmed: “I do not see the creditors signing a waiting agreement for the country, because if Argentina gets up from the negotiating table so closely, it is because they do not want to agree.”

And if they do not want to agree then it is better that the bondholders start looking for a good law firm to advise them“he finished.

The Government is also gambling that it would not serve anyone to go to a long trial in the courts of New York and that is why they could reluctantly sign a standstill. But the reality is that this alternative made more sense at the beginning of the negotiations, and with the pandemic starting to wreak havoc, than when there is a $ 3 difference between what investors are asking for and what the country says it can pay.

In silver: less than $ 200 million per year is the cost of bringing the difference closer. But neither does the government have many alternatives. The level of adherence without the 3 united groups of bondholders is very low. The only thing that is known is that local investors (representing less than 10% of the total), accepted the offer and some funds from abroad that had already been warning that they would Fintech, Gramercy and Greylock.

The President decided not to extend or improve the offer to bondholders.

The President decided not to extend or improve the offer to bondholders.

The numbers don’t give the government

But with these accessions, the country also does not reach the thresholds that the country self-imposed to make the operation viable.

The Government considered different scenarios that must be given in order for the operation to be carried out: that they accept the bond offer that has more than 66.6% of the stock of all the eligible exchange bonds, taken as a whole. Furthermore, taking each Indenture (legal terms with which the securities are issued) separately, one of the following conditions must be met: (a) acceptance of the offer of bondholders who have more than 50% of the stock of all the bonds of that Indenture or, (b) the acceptance enables Argentina to exchange more than 60% of the stock of all the bonds of that Indenture (to do so with an acceptance of more than 50%, the country should redesign series and execute CACs).

Not even manipulating the series of the bonds the country can achieve thresholds of adhesion, with which if the big creditors do not enter, the exchange falls completely and it will not be able to prosper. Those who entered, automatically, cannot benefit from having accepted the deal and return to zero as all the bondholders.

Argentine assets will surely start the financial day under great pressure. The bonds mainly, which had been operating under an agreement scenario, will fall sharply. The banks’ shares, which gained more than 30% in New York in July, will also suffer punishment. And it will be necessary to follow closely what happens with the parallel dollar, both the blue As the counted with liquidation, since they will surely sting on the point before the worst non-pragmatic with debt.

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