Argentina on the brink

Argentina will extend negotiations over a $65 billion debt restructuring proposal until May 22, the government said on Monday, setting the stage for tense last-ditch talks as the South American nation races to avoid default. The new deadline, which comes after an initial cut-off passed on Friday without the support needed for a comprehensive deal, means the offer will expire the same day Argentina could trigger default over a $500 million interest payment. The major grains producer is racing to revamp unsustainable debts amid a painful recession, high inflation and increasingly expensive borrowing costs as concerns over a potential ninth sovereign default have rattled investors and hit bond prices.The talks so far have been complex, with three major creditor groups rejecting the initial proposal and pushing for improved terms. Argentine officials have said the country cannot afford to pay more, though they are open to counterproposals. "Clearly, both sides are playing hardball," Capital Economics said in a note on Monday, adding that the talks were likely to drag on and that creditors could face large haircuts, especially with the global coronavirus pandemic sapping growth. "The government is facing ever-growing demands on its purse as the health crisis continues," it said. "Accordingly, recovery rates for foreign bondholders of around 30% are looking increasingly likely." Analysts calculate that the current offer, which includes a three-year payment halt, a large cut to coupon payments and maturities pushed back to 2030 and beyond amounts to a net present value of around 30-35%.