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Exclusive: Argentina bondholder alliance splintering over debt deal

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imageEconomy11 hours ago (Jul 01, 2020 04:25PM ET)

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(C) Reuters. FILE PHOTO: Argentine one hundred peso bills are displayed in this picture illustration

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By Marc Jones

LONDON (Reuters) – One of the main bondholder alliances in Argentina’s $65 billion debt talks is at risk of splintering after at least three of its members signalled they could break ranks and accept a lower value deal than the group has proposed, three bondholders said.

The bondholders, who requested anonymity, told Reuters the Argentina Creditor Committee (ACC) – one of three main creditor groups – has been jolted by U.S. funds Gramercy, Fintech and Oaktree signalling they were willing to pursue their own deals.

The ACC has proposed a deal where bondholders would effectively receive 55-56 cents for their securities, but the indications that the trio and perhaps one or two others may be prepared to accept a lower offer, has caused a rift.

“It is possible,” one of bondholders familiar with the discussions said of the potential fracturing of the group. “These committees are fluid and firms come and go.”

Gramercy, Fintech and Oaktree, which had joined forces with ACC earlier this year, either did not immediately respond to requests for comment or were unreachable for comment on whether they have had separate contacts with Buenos Aires.

The ACC will need to hammer out the issue over the coming days, which come at a crucial stage in talks with the Argentine government.

Negotiations have been extended a number of times in an effort to reach a deal, though the other two main creditor groups, the “Ad Hoc” and “Exchange” groups, complained this week of a lack “meaningful engagement” from the government since mid-June.

Those two groups, which have also forged an alliance, could potentially draw in ACC members if it did end up splintering, though some funds may also simply go their own way.

“There’s a split in our committee with the majority not in favour of this backchannel deal supported by funds that have hardly any bonds,” a second bondholder said of the ACC friction.

A third bondholder added: “Could Gramercy and Fintech go their own way? Certainly, but hopefully we can still find a unified ACC approach.”

The first two bondholders were also critical of proposed tweaks to the government’s deal that they see as an attempt to strongarm investors to sign up – rewarding those who do to the detriment of those who do not.

Between $10-$15 million a day of interest has been building up on Argentina’s defaulted bonds in recent weeks, while other limited-time-only sweeteners have also been dangled, they said.

“It sets a bad precedent for other restructurings,” the second bondholder said. “They are trying to use these (proposals) in a coercive manner.”

The first bondholder also voiced frustration that the Argentine government had not been keener to bridge the relatively small gap in the offers.

“The frustration is that Argentina knows the contours of the deal that would get broad acceptance,” he said. “But they are spending valuable time and resources in trying to extract every last tidbit of value out of creditors.”

Exclusive: Argentina bondholder alliance splintering over debt deal

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