May 21, 2020 / 3:49 PM / 13 days ago

Argentina extends debt talks deadline as default looms

BUENOS AIRES/LONDON (Reuters) - Argentina on Thursday said it would extend a deadline for talks with creditors to restructure around $65 billion in foreign debt to June 2, as the two sides edge closer to a deal needed to avert a messy default that would drag the country deeper into crisis.

A man wearing a face mask as a preventive measure against the coronavirus disease (COVID-19), walks in front Argentina's Banco Nacion (National Bank), in Buenos Aires, Argentina May 21, 2020. REUTERS/Agustin Marcarian

The extension comes as Argentina faces a potential ninth sovereign default if it misses bond payments due Friday, which had also been the cut-off date for restructuring talks after an initial proposal by the government was rejected earlier in May.

The recession-hit South American nation and its creditors have been signaling progress in the talks but need to close a still sizeable gap between the debt relief the government is seeking and what creditors are willing to give up.

The government said in a statement it was still receiving and analyzing suggestions from investors over “different paths to improve recoveries” in order to maximize support for the deal while remaining what it see as sustainable.

Creditors and analysts expect Argentina to default on around $500 million in bond payments due on Friday, but say the impact of that would depend on the success of the restructuring deal and how fast one can be struck.

“I think it’s going to be very difficult to avoid some sort of default,” said Hans Humes, who heads Greylock Capital and has played a major role in one of the main creditor committees.

“But it’s very different if you can come up with some way to cure the default in short order ... I would hate to see something disorderly as a hard default.”

Humes, speaking at a virtual conference on Thursday, said he thought Argentina would find consensus with creditors.

“There should be enough flexibility to get to a deal that is acceptable,” said Humes. “But we’ll have to see.”

Others remained skeptical.

Edward Glossop of Capital Economics said in a note on Thursday that a default would not surprise the market, where Argentine bonds are trading at distressed levels.

But he said talks could drag on and losses could be bigger than expected, with international bond values “as low as 30 cents on the dollar.”

Reporting by Marc Jones and Cassandra Garrison and Adam Jourdan; Editing by Steve Orlofsky

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