Debt in pesos: how is the exchange proposal that the government is negotiating with the banks

The talks are advanced and the predisposition of the banks to find a solution to the mountain of peso debt maturities that operates during the second quarter could not be better. However, the devil is in the details and trading has been stalled in the last few hours due to differences over one key aspect: the put or put option, in financial jargon, which functions as a bailout insurance that the government has put on the table for the entities. agree to exchange their assets for securities with a term of more than one year.

Given the lack of definition, from the offices of the Secretary of Finance, Eduardo Setti, as well as from the office of the Vice President of the Central Bank, Lisandro Cleri, they canceled in time a meeting scheduled for yesterday afternoon with portfolio managers and mutuals (FCI), who now expect to be called next week after the conclusion of the discussion with the banks.

The role of the FCIs is key: although they have much less stakes than the banks, they still own 9% of the bonds, which is equivalent to approximately $540,000 million maturing before July.

Specifically, sources involved in the negotiation told GlobeLiveMedia that the proposal under negotiation consists in exchanging all the securities whose maturity is spread out between this month and June inclusive against a menu of 3 bonds, adjusted by the CER and also “dual” – those which yield the best return between the evolution of inflation or the official exchange – maturing in August 2024, October 2024 and March 2025. The idea is to spread 60% of the current maturities between the dates of August 2024 and March 2025, while 40% would expire in October 2024.

All titles would have a puta kind of rescue “guarantee” in principle from the Central Bank, which is precisely the point that has prevented, for the moment, from closing the issue.

Strictly speaking, this mechanism already works but, as it is designed, the put it is activated at a rate level 200 basis points higher than the previous day (ie when the fall in the price of the bond is marked). The banks reject this threshold and the possibility, which also flew over, that the put is in charge of the Treasury. For this reason, they ask to raise it to only 50 basis points. With this condition accepted, according to reports, financial institutions would exchange 50% of their assets.

For the Economy, it would be a question of erasing maturities for nearly 500.00 million dollars, a figure to which would be added at least part of the volume of bonds held by the FCI but also by the insurance companies. , which concentrate some 400,000 million dollars, always in titles that They expire in the first half.

Moreover, the massive participation of state bodies goes without saying, mainly the ANSES Sustainability Guarantee Fund, the Central Bank and public banks, as well as other state companies and even municipalities. which have been placed in recent months in national treasury debt. According to various private calculations, co-ownership guarantees a floor of 52% participation in the exchange, although some private analysts carry this calculation up to 62% of total debt.

In any case, the acceptance of private creditors is essential, because the volume of maturities is very high and the pressures on the foreign exchange market would be extremely strong if an acceptable level of acceptance was not also reached between them.

Hence the efforts of the Minister of the Economy, Sergio Massa, and his team to clear the horizon in the middle of an election year, which would not stop at this operation. In fact, the second half begins with payment commitments in July that exceed $1.5 trillion. However, once the first exchange closes, the market sees that the way will be paved. “The truth is that beyond the political issue, the market today has prices that indicate they don’t fear a disruptive event,” an expert said. Trader.

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