Negotiations between the Argentine government and its creditors have been fragmented. President Alberto Fernandez's team worked over the weekend to bridge the gap with the ACC Bondholder Group (BG) who were more open to accepting the government's proposal and got the four main funds of this group to agree informally: Gramercy, Oaktree, Fintech, and Greylock have already said yes to Finance Minister Martin Guzman's proposal.
This week, LPO reported that BG was the group that had accepted the government's proposal, which no longer includes a GDP or export coupon, but instead a premium for those who enter the exchange earlier, although the deal has not yet been formalized.
In a statement to which LPO had access, these four groups notified the Ministry of Economy that they "wanted to let you know that Gramercy, Fintech, Greylock and Oaktree support your offer. We have had difficulty getting the ACC group to formally accept due to challenges and governance issues. Having said that, we accept the offer (53.10) and the value of the PDI bond (52.5)," they said. The PDI bond (post due interest) is a premium that pays the interest due for the period that has not been paid.
Regarding this bonus, the four funds asked to be given a reward for accepting the proposal earlier. According to the statement, they suggested to Minister Guzman "to use that bonus at 65% against running interests and 35% as an early consent bonus."
According to the creditors, in the nature of these "carrot-and-stick" (threat and incentive) negotiations, for many other bondholders this premium serves to "increase the fiduciary risk of those left out of the swap".
"This will increase participation and the likelihood of achieving the CACs, a necessary goal for this to be a uniquely successful restructuring," they said in the letter in which they pledged to work together with the government to close the details of the transaction.
The agreement turns the tide for the Ad Hoc group, which until now has taken the most intransigent position, as reported by LPO, already suffering internal fractures among the funds that are most concerned about closing a deal soon and showing the viability of the emerging debt market in the face of a possible global wave of post-pandemic restructuring, and among those who want an exemplary punishment for Argentina to deter other countries from defaulting on their commitments.
Thus, in a quick reaction, Ad Hoc Group, led by BlackRock, together with the group of the Bonistas del Canje, issued a statement in which they assured that since last June 17, when negotiations were stalled, there was no serious commitment from Guzman to reach an agreement.
Negotiations with these group of creditors came to a halt over two issues: the financial difference and the requirement to issue the new debt with the 2005 indenture, a regulation that was abandoned internationally in 2014 to avoid long and painful legal restructuring processes that open the door to vulture funds.
It is worth noting that the Bonistas del Canje group has always maintained this position. They do not want to give up the rights they have as creditors of the Par and Discount bonds. But this is not a priority for BlackRock. Larry Fink got angry when Guzman decided to use the fine print of the bonds sold by former President Macri in a way that could undermine the bondholders' position through the Pacman strategy.
"The 2016 bonds have an article in favor of Argentina, it is not our responsibility that their lawyers did not read it at the time. Our responsibility is to apply it because otherwise we would be failing in our duties as public officials," one of the government's negotiators told LPO.