BUENOS AIRES (Reuters) – Argentina could cede ground to creditors on key legal terms as it seeks to strike a deal to restructure about $65 billion in external debt, but the government will not increase the flow of global cash in the payment, two sources told Reuters.
The South American country is facing a standoff with bondholders after groups of creditors joined forces to reject the government’s proposal this week and put forward their own. The government has repeatedly said that it cannot offer more.
However, two sources close to the talks said the government may be willing to bow to some of the demands of the creditors’ joint counter-proposal as long as it didn’t involve increasing cash flow in a final deal.
Argentina’s economy ministry declined to comment.
Legal demands from creditors include changes to the 2016 deed for new debt issued in exchange for “Macri” bonds, to prevent the government from using “Pac-Man” style measures to make future changes to any agreement.
“Argentina may be willing to identify weak points around the legal clauses, which creates tension and noise within the investment community,” said a source familiar with the talks, declining to be named because the negotiations are private.
Talks to identify where concessions could potentially be made were underway, the person added, and there could be room to “move and twist” the existing Argentine proposal to increase net present value (NPV) without investing. more money.
“So I think there might be some flexibility, but not on the actual cash flow.”
A second source, a person close to the talks and familiar with the government’s thinking, said that in economic terms the government’s current offer was final, although there may be some wiggle room on the legal clauses. .
“In legal terms, Argentina could make changes if a consensus emerges that the existing model clauses are somehow flawed,” the person said. “There will be no change to the NPV unless creditors realize that after the restructuring, Argentina deserves a discount rate of less than 10%.”
Despite the heels being dug, analysts say a gap of around 3 cents on the dollar between the parties at the negotiating table should be closed in final talks ahead of the current August 4 deadline for an agreement in order to avoid a messy legal stalemate.
That helped push up Argentine bond prices, which rose an average of 1.8% on Wednesday.
Argentina has been in default since May, the country’s ninth, and is heading for an economic contraction of 10-12% this year due to the impact of COVID-19, deepening a recession since 2018.
Siobhan Morden of Amherst Pierpont said a compromise solution would be a win-win solution for Argentina that would give it substantial cash relief and allow it to focus on domestic debt markets and negotiations with the IMF .
“It’s almost incomprehensible for Argentina to choose another alternative,” she wrote in a note.
Reporting by Adam Jourdan and Hugh Bronstein; Additional reporting by Rodrigo Campos; Editing by Tom Brown