A group of major asset managers who are creditors to Argentina have rejected the government’s proposal aimed at overhauling $66.2bn of its foreign-law debt bonds governed by the law of a foreign jurisdiction- saying it inflicted an unjust amount of financial pain on international bondholders.
In statements released on Monday, three creditor groups rebuffed the terms laid out by the government late last week, which called for interest payments to be delayed until 2023 and principal payments until 2026.
The tax would affect 11,000 people with fortunes of at least $2 million, Argentine Economy Minister Martin Guzman said, without specifying where that cut-off point might come. He spoke in an interview with journalist Horacio Verbitsky, published on the website El Cohete a la Luna. President Alberto Fernandez, in a separate interview, spoke of the need for wealth redistribution.
Argentina, which has been grappling with recession, rocketing inflation and a mounting debt crisis, is battling to avoid a messy default and has said it wants to find an amicable path with creditors, though that has proved far from simple.
Argentina has instead chosen to make a unilateral offer,” wrote one creditor group representing holders of these exchange bonds. “Argentina’s proposal does not represent the product of good faith negotiations and the Exchange Bondholder Group considers it to be unacceptable and does not intend to support it.”
The country’s proposals “seek to place a disproportionate share of Argentina’s longer-term adjustment efforts on the shoulders of international bondholders”, the statement said.
The group, which is advised by Dennis Hranitzky at law firm Quinn Emanuel Urquhart & Sullivan and counts hedge funds Monarch Alternative Capital and HBK Capital Management among its members, said it collectively held more than 16 per cent of the exchange bonds issued by Argentina, an amount equivalent to more than $4bn.
Another bondholder group, which is advised by White & Case and includes BlackRock, Fidelity, Ashmore, T Rowe Price and other large institutional investors, also said it could not support the government’s proposal.
Because of the health crisis, it doesn’t make sense for countries that have limited resources to pay creditors, Guzman said. That would make recovery more difficult once the pandemic is over. Even before the crisis though, Argentina was already unable to pay its debt.
Argentina had 2,839 confirmed Covid-19 cases and has reported 132 deaths. It has imposed a nationwide lockdown since March 20, which appears to have helped flatten the rate of infections.