Argentina’s creditors have approached several international organisations to seek endorsement for a proposal to change the rules that govern some of the country’s overseas securities, according to people familiar with the matter.
The International Monetary Fund (IMF), the US Treasury, the International Capital Market Association (ICMA) and the Institute of International Finance (IIF) are among the organisations that have been informally approached by bondholders, said the people, who asked not to be identified discussing a private matter.
While the groups have no formal say over how bond contracts are worded, the idea is that their buy-in would give Economy Minister Martin Guzman political cover to accept the changes, which bolster creditors’ rights by closing legal loopholes for Argentine bonds issued in 2016 and later. The changes to the indentures is a key point of negotiation in the final stretch of talks between Argentina’s government and major creditors including Blackrock Inc., Ashmore Plc and Fidelity Management and Research Co.
Currently, the bonds’ collective action clauses are written in such a way that Argentina could push through a restructuring without broad support from its bondholders through so-called “pac-man” and re-designation strategies. Investors want to make it harder for Argentina to engage in those tactics, which take advantage of how the CACs are structured. Guzman said in an online event the country would adopt the changes if they are supported by the international community.
Argentina and its major creditors are entering the final stages of month-long talks to restructure $65 billion of securities, which the government said it couldn’t pay even before the coronavirus further battered the shrinking economy. The gap between the two sides’ negotiating positions is only about 3 cents on the dollar on a net present value basis, according to Goldman Sachs Group Inc and Morgan Stanley analysts.
The government’s latest debt offer to bondholders will expire on August 4, unless extended.
“We’re still assessing all the options and soon we’ll make a decision,” Guzman said when asked about news reports that the government would delay the deadline.
Argentina won’t expropriate soy trader
Argentina is backtracking on a plan to intervene in the bankruptcy of soy processor Vicentin SAIC, marking a dramatic reversal from efforts to take over the company in some way or other.
The government won’t risk taking on Vicentin’s private debt and making Argentines responsible for its management’s “irresponsible” decision-making, President Alberto Fernandez said on Twitter. Fernandez said the government was annulling its June 9 decree announcing the takeover because the judge overseeing Vicentin’s bankruptcy hadn’t allowed it to push aside current management in favour of government officials.
The government also criticized the court for recently giving Vicentin another 40 days to come up with its financial statement for the year ending October 2019. The statement was due in February.
Vicentin is Argentina’s biggest exporter of soy meal for animal feed and soy cooking oil. Argentina is the world’s top supplier of those products.
Argentina had said in the June decree that it would take over Vicentin for 60 days while Fernandez mulled an expropriation bill and other options to rescue the crop trader. After widespread opposition from the agriculture industry, businessmen and even pot-banging protesters, the government then opened up to other ideas to avoid expropriation. It delegated the task of finding a solution to Santa Fe province, where the company is based.
Santa Fe’s intervention efforts still stand, but they will likely come to nothing, putting the bankruptcy back to where it was earlier in the year — a simple mediation by the judge between Vicentin and its creditors — according to a person in the province with direct knowledge of the situation. Vicentin owes about $1.4 billion.