Argentina

Argentine bonds rallied on Monday after the government surpassed expectations with a new debt restructuring offer. But markets are still waiting on the reaction of the largest bondholders, as Argentina had abandoned negotiations ahead of its updated offer.

As tensions between Argentina and its largest bondholders climbed this week, the government’s prize asset, oil firm YPF, differentiated itself with a debt exchange that, according to rating agencies, does not punish creditors — unlike the sovereign’s proposals.

The possibility of Argentina’s debt negotiations ending up in court drew closer on Wednesday night, as the positions of the largest group of bondholders and the government appeared to be irreconcilable.

Bond investors and analysts expect Argentina to extend Friday’s restructuring deadline yet again amid continued promising signs that a deal is near, but some warn it is wrong to assume an agreement is a foregone conclusion.

A group of institutional investors owning bonds issued by the Argentine Province of Córdoba has hired BroadSpan Capital and Mens Sana Advisors as financial advisors as the province works on a restructuring of its $1.685bn of international bonds.

Argentina said on Monday evening that a new proposal to creditors was imminent after the government again extended the participation deadline in its restructuring. Optimism continues to grow over the chances of an agreement — even as an IMF statement on the process triggered forthright responses from bondholders.

Argentina officially entered default for the ninth time on May 22 as the grace period expired on $503m of overdue coupon payments. However, there is increased optimism that the sovereign will reach an agreement with bondholders after the largest creditor group said “direct and immediate discussion” was required.

Argentina is set to enter default on its international debt for the ninth time on Friday, but the sovereign curve performed well this week as investors and analysts say that creditors will continue negotiations well after the grace period on $503m of coupon payments expires.

Only in Argentina could a finance minister claim that default on billions of dollars of bonds constitutes merely an “anecdotal date”.

Analysts expect negotiations between Argentina and its foreign bondholders to continue past May 22, the date that the sovereign could enter default, with restructuring proposals from the creditors implying recovery values up to 50% higher than what the issuer initially proposed. But as both parties appear to be keen to find a solution, the bonds continued their rally on Monday.

Argentine authorities were understood to be weighing up debt restructuring proposals from several bondholders on Sunday evening as default looms large for the South American sovereign.

The Province of Buenos Aires (PBA) legally entered default this week amid pleas from its creditors for serious restructuring negotiations. But Argentine sovereign bondholders are still holding out hope that they may come to an agreement with the national government.