Argentina, creditors getting closer to deal as new offers exchanged

ARGENTINA - BUENOS AIRES. Argentina and its creditors have edged closer to a deal after a second round of proposals were exchanged between key bondholders and the government, bolstering hopes that an eventual accord can be struck to revamp around $65 billion in debt.

Buenos Aires unveiled an amended proposal on Thursday with slightly earlier maturities and a shorter two-year grace period on coupon payments, after it earlier knocked back a new counter-offer from two key creditor groups.

The South American country’s economy minister said the new proposal from bondholders was a step in the “right direction,” but still fell short of what the country needed to dig itself out from its debt crisis amid a lengthy recession.

“More work is still needed yet the two sides are getting ever closer,” Morgan Stanley said in a note, where it calculated the net present value (NPV) of the new offer to be around 41.5 cents on the dollar, up from 33 cents in the original offer.

“An NPV of 41.5 is a decent improvement and gets much closer to the 45-50 area where we think that a deal can be reached,” the investment bank said, adding one could be struck in the third quarter of the year with “further goodwill on both sides”.

Argentina is locked in talks to revamp a foreign debt pile that has become unsustainable. The major grains producer last week failed to make around $500 million of bond payments, marking its ninth sovereign default.

The government has extended a deadline for the talks to June 2, though people close to the negotiations say the cut-off could be pushed back further.

Siobhan Morden at Amherst Pierpont said in a note on Friday that the extended deadlines and improved offer suggested a compromise could be found.

“There is still no official breakthrough between Argentina and bondholders; however there is latent optimism of reaching a compromise under the moderate influence of President (Alberto) Fernandez,” she wrote.