Argentina

A swift, firm rejection from the bondholder group considered to hold most sway in Argentina’s restructuring negotiations effectively closed the doors on any chance of success for the government’s first offer less than one business day after it had announced terms.

After making investors wait until the end of Friday's trading session that saw a strong bid for its bonds, Argentina finally proposed terms on its mammoth external debt restructuring. With early recovery rate estimates in the 30%-35% range, investors did not even wait until the weekend was over to express their discontent.

Bondholders are expected to fight a formal restructuring proposal from the Argentine government that should arrive on Friday and proposes heavy haircuts, say market participants. Argentina’s government appears ready to play hard ball.

Argentina’s move to suspend domestic law bond payments for the rest of the year encouraged holders of its foreign law debt, some of who are beginning to spy value in the battered curve.

For now, at least, Argentina appears to be asking its domestic bondholders to take the brunt of the government’s efforts to ease cashflow worries amid the Covid-19 crisis, providing upward momentum to foreign law debt prices.

As the initial government-imposed deadline for Argentina’s mammoth debt restructuring sailed by without a concrete offer to creditors having been put on the table, some analysts are worried that a hard default may be inevitable.

After its long-awaited debt sustainability analysis disappointed many investors and analysts, Argentina’s desire to solve its debt restructuring quickly may buckle under the pressure of its attempts to mitigate the impact of Covid-19.

Martín Guzmán, Argentina’s finance minister, said on Friday afternoon that the country was “ready to intensify interaction” with international bondholders ahead of a debt restructuring. But with authorities set to announce further spending to protect its people from the economic impact of Covid-19, the IMF echoed the government’s view that a fiscal surplus was unfeasible in the short term.

A sharp sell-off in Argentina’s international bonds is likely to have a major impact on the government’s attempts to restructure nearly $70bn of debt, but there was disagreement as to whether lower secondary prices would make life harder for the borrower.

The Province of Buenos Aires said on Monday that it had hired Bank of America and Citi to advise it on its debt restructuring.

Holders of Argentine sovereign bonds have until March 16 to identify themselves to the issuers as the government prepares to restructure $67bn of foreign law sovereign bonds.

Argentina's economy ministry has appointed two dealer-managers and a financial advisor to manage the restructuring of the country’s $67bn of foreign law sovereign bonds.