“IF YOU decide to engage in a dialogue with your creditors, if you want to do a restructuring, you don’t want to do an Argentina.”
That is the advice to Ireland of Hans Humes who, as co-chairman of the Global Committee of Argentina Bondholders, represented holders of the country’s defaulted bonds in debt restructuring negotiations.
“When Argentina did its restructuring there was not enough of a negotiation. I think one of the things that took people aback with the Argentinian exchange offer was that it was seen as unilateral. Restructuring is a balancing act. You need to engage in a constructive conversation with creditors.
“I’d say if Argentina had been more responsive to what the creditors were looking for, at least the creditor groups I was working with, and had adjusted some of its initial offer, they could easily have ended up with an acceptance rate of over 90 per cent . . .”
Argentina’s 2005 restructuring offer was only accepted by 75 per cent of creditors. “They didn’t solve the problem and they didn’t get access to capital markets. They didn’t get a critical mass to end litigation.”
Defaulting on debt and saying, “here’s a deal, take it or leave it”, says Humes, is not always cheaper. “You are going to have a problem guaranteed. And if you look at the cost-benefit of what Argentina did the actual benefit of not improving the 2005 deal by 10 per cent might have been around $5 or $6 billion. But the cost has far exceeded that because of the high price they have had to pay for refinancing and the forgone direct investment.”
