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Argentine bonds jump as government weighs debt restructuring counteroffers

Credit: REUTERS/Agustin Marcarian

Argentine bonds jumped on Monday as the government weighed new counteroffers from its creditors while racing to strike a deal to restructure about $65 billion in foreign debt before Friday, when a grace period for paying interest on three dollar-denominated bonds expires.

By Cassandra Garrison and Eliana Raszewski

BUENOS AIRES, May 18 (Reuters) - Argentine bonds jumped on Monday as the government weighed new counteroffers from its creditors while racing to strike a deal to restructure about $65 billion in foreign debt before Friday, when a grace period for paying interest on three dollar-denominated bonds expires.

The counteroffers from leading creditor groups, announced by Argentina's government late Friday night, call for a shorter one-year grace period on payments and higher average interest rates than the government's initial proposal, according to local media outlet Infobae.

Argentine over-the-counter bonds were up an average 3%, traders said, while country risk dipped 97 basis points to 2,740.

Argentina, which is at risk of default on the bonds, proposed last month a tough restructuring that included a three-year payment halt, maturities pushed back until the next decade and a 62% reduction in coupon payments, an offer rejected by the majority of its creditors.

A joint counteroffer by firms Greylock, Gramercy and Fintech proposed a net present value of $58 for every 100 nominal dollars of current debt, an average interest rate of 5.03%, and a 2.3% lowered valuation, or haircut, on capital.

Another separate creditor group proposal, backed by BlackRock Financial Management, implies an average interest rate of 4.44%, a net present value of $60 per $100, and capital amortization starting in 2025.

A third offer proposed by firms including Monarch and BHK Capital included no haircut on capital and an average interest rate of 4.75% with capital amortization starting in 2027. It also included a net present value of $58 dollars per $100.

A spokesman for Argentina's Ministry of Economy did not immediately respond to a request for comment on the new counteroffers.

Economy Minister Martin Guzman said on Friday in a virtual conference that ongoing talks with creditors had been "positive" and that the government was open to considering new proposals within the framework of debt sustainability.

DOWNGRADE

Buenos Aires province, meanwhile, was downgraded on Friday by ratings agency S&P Global to "SD" from "CC" after it missed the deadline for a bond payment of about $110 million.

The province had been deadlocked with its own creditors over the restructuring of $7 billion in foreign debts after they rejected its earlier proposal.

The province's situation, seen as an indicator for how talks could go at the sovereign level, does not necessarily mean Argentina will have the same fate, said Lisa Schineller, lead analyst for sovereign ratings in Latin America at S&P Global.

"It's not clear if the (Buenos Aires province) discussions make it more complicated," Schineller said.

"Coming to a conclusion on any debt renegotiation process is not easy ... the signal is that (government officials) want to advance as fast as they can, although at this point, it is not necessarily likely by the 22nd."

(Reporting by Cassandra Garrison and Eliana Raszewski; Additional reporting by Walter Bianchi in Buenos Aires and Marc Jones in London Editing by Paul Simao)

((Cassandra.Garrison@thomsonreuters.com; +54 11 5830 7443;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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