According to the information provided by the Ministry of Economy, investors will have until August 4 to accept the new proposal whereby Argentina seeks to restructure USD 64.8 billion of debt issued under foreign law. Although the first reactions of the market to the new offer reported by the Government were positive, analysts wonder what is known so far and what details remain to be known and that could change the mood of creditors.
In the press release distributed on Sunday night, the Ministry of Economy confirmed that the country will review the terms and conditions of the exchange invitation made on April 21, and gave some guidelines:
–There will be capital reduction, coupon increase and shorter maturities of the new bonds that are delivered.. Withdraw between 12% and 5% in the original proposal, depending on the type of bond, now those percentages have been reduced to 3% and 1.5%, respectively. As for interest, the simple average of the first offer was 2.9% and now it has risen to 3.5%.
–Accrued interest will be recognized from April 22, the expiration date of the Globals, and those of all the securities that generate them until September 4.. A bond with maturity in 2030 will be delivered, which will pay interest every six months.
–On the other hand, the Government proposes to start paying interest in September 2021, instead of 2023 – one of the points most questioned by creditors – and it will be done every six months, on March 4 and September 4 of each year. . In turn, those who enter the exchange during the term in which the offer will be open -until August 4- will receive more bonds for current interest.
–Faced with requests from creditors that the new exchange bonds have the same legal parameters as the original titles, the Government will allow holders of Eligible Bonds issued under the 2005 Contract to exchange such Eligible Bonds for New Bonds to be issued under the 2005 Contract. The Ad Hoc committee, which leads the Blackrock fund, requested that all bonds have the indentures of 2005, request that was not granted. Each title, then, will receive another that will respect the original contract.
In this way, could add many followers of the Exchange Bondholders group, which until now had a unified strategy with Ad Hoc, but that in the face of this concession, they could accept the offer. Anyway, there were still no statements about it. The only two funds that advanced that will accept the Argentine proposal are Gramercy and Fintech, the latter leader of the Committee of Creditors (ACC).
With all the improvements made to the offer, the net present value (NPV) -considering a 10% discount rate- scales to USD 53.5 for each nominal USD 100, but that figure will be reduced for those who enter forced by the drag of the Collective Action Clauses (CACs). According to these clauses, if certain majorities – which vary according to the bonds – are achieved, the rest must enter.
But to this is added the general “minimum acceptance threshold”, which the Government included in the new offer, and for which no details are yet known. Nor is it known what changes the so-called Rufo Clause will have, which states that if in the future the Government improves the offer to include holdouts, it must improve it for everyone.
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