“Final” Offer Made by Argentina to Creditors; Blackrock Is Reluctant to Agree

RIO DE JANEIRO, BRAZIL – Argentina‘s struggle with its creditors to avoid a default has apparently reached its final stage this week. On Monday, the government led by President Alberto Fernández and the Minister of Economy Martín Guzmán made a “final” offer to its various creditors.

The offer was submitted to the US Securities and Exchange Commission (SEC) and provides for the repayment of US$53.3 for every US$100 of debt incurred during Mauricio Macri’s term of office (2015-2019). In addition, US$59.5 per US$100 would be paid on outstanding bonds issued under the 2005 and 2010 debt rescheduling agreements.

According to the Argentine government, this offer represents the limit of what the government can afford in order to avoid defaulting. The offer now submitted is valid until August 4th.

An agreement must be reached by then. However, during the week, experts have speculated that an agreement could be reached much faster. The group of private creditors of Argentina’s public debt (ACC), which comprises around 30 funds and investment groups, had already declared before the government’s offer that it would be satisfied with around 54 percent of the debt, which is fairly close to the amount now proposed.

However, on Wednesday, the two heavyweight creditors – Ad Hoc and Exchange Bondholder groups – which together hold around one-third of the total debt of US$65 billion, initially rejected the Argentine offer.

The Ad Hoc Argentine Bondholder Group comprises the Blackrock, Ashmore and Fidelity asset managers and investment funds, among others. After the rejection, the Minister of Economy Guzmán immediately responded by saying there was “clearly” no room to improve the country’s “maximum effort”.

However, the final word appears to have not yet been said. On Wednesday, the creditors’ group initially said that the offer was a “constructive compromise”. Yesterday, July 9th, Reuters reported that the Ad Hoc Bondholder Group believed that it might possibly accommodate Argentina to a certain degree after all; however, the offer would also need improvement.

Blackrock in particular seems to be reluctant to reach an agreement with the Argentine government on the terms currently on the table. The world’s largest financial manager, which manages around US$7.5 trillion in assets, has been “annoyed and tired of the negotiating style” of Minister of Economy Guzmán.

Blackrock referred to the Ecuador case. Early this week, an agreement was reached with a number of creditors on a debt rescheduling of around US$16 billion.

The International Monetary Fund (IMF) commented positively on the Argentine government’s offer. In recent months and in previous offers to creditors, the IMF had already praised Argentina’s level-headed and sensible approach to the negotiations.

Now, IMF spokesperson Gerry Rice said that the offer was “an important step” and he hopes that it will lead to a “sustainable path” towards economic growth.