Argentina and holdout creditors may have not started
negotiating yet, but market participants said they were hopeful
the parties would reach an agreement that would prevent the
||Jorge Capitanich, Argentine government chief of
staff, speaks at a press conference on Monday
Source: Casa Rosada
Holdout creditors led by NML Capital said on Monday that
Argentina had not started negotiations (
see separate story
), and the sovereign is expected to
enter a 30-day grace period today on a payment due Monday on
restructured debt. Yet some observers are optimistic the
sides will reach a deal before the country is formally
declared in default after the grace period expires.
Mike Gerrard, MD at restructuring and M&A advisory firm
BroadSpan Capital, said Argentina's efforts to normalize
relations with the investment community showed the country
was likely to enter the negotiations with goodwill, but that
the talks would not be easy.
"Importantly, Argentina has recently reached agreement with
its Paris Club creditors and with Repsol. Looking at the
rulings in the US, there could be a lot to gain from a
negotiated solution. That doesn't mean there won't be a
different narrative on the ground in Buenos Aires, but
reaching a practical solution that would allow Argentina to
regain access to the international capital markets is
important. So it seems there is a path here, rocky as it may
be, toward negotiation," he told LatinFinance.
The Argentine government would likely continue using hostile
language toward holdout investors in order to please its
support base at home, but NML and Argentina seemed to be
aware that the window of opportunity that has now opened "is
the best one that has existed since this started", he
"Argentina likely recognizes that the cost of not having
access to the international capital markets can outweigh the
cost of settling, it's a pragmatic look at what's the best
for the country. Although they may prefer not to negotiate,
given the way the process has unfolded it's probably a better
strategy than the alternative."
A rise in the price of Argentina's dollar and
peso-denominated bonds on Monday morning suggested investors
were optimistic the negotiations would bear fruit, a UK-based
"The market is pretty bullish … No one really knows,
but certainly the noise that we're seeing shows that that
there is some type of momentum that would lead to an
agreement," he said.
The fact that Argentina's president Cristina Fernández
is due to finish her second mandate next year could help the
negotiations, said a DCM banker in New York.
"Cristina does not want to leave behind the legacy of having
put the country in default," he said. "Her back is against
the wall, and they are going to find a way to negotiate with
the holdouts … She is going to continue to rattle the
sabre. She's a populist, what is she going to do?
"Their bonds are definitely off the low, so people are
expecting an upside," he added. LF