UPDATE 1-Argentina's largest creditor group may lower demand if gov't ups offer-sources

(Adds details, quotes, background)

By Karin Strohecker

LONDON, July 9 (Reuters) – A group of Argentina’s biggest creditors is willing to lower its demands and strike a deal quickly in the country’s $65 billion debt restructuring negotiations, if the government is prepared to make concession on its side, three sources told Reuters.

Argentina, which has been locked in drawn-out restructuring talks, made what it called a “final offer” on Sunday to its creditors. On Wednesday, two key creditor groups – which between them hold around $21 billion – knocked back the offer, though they said it was a “step in the right direction.”

Now, sources familiar with the thinking of members in the largest creditor group, the Ad Hoc Bondholder Group which includes major asset managers such as BlackRock, AllianceBernstein and Fidelity – said creditors were ready to compromise.

“There needs to be more value,” said one source. “Argentina has to come up more and the creditors need to come down. The creditors are prepared to move but Argentina needs to come up.”

The person said Argentina’s latest offer had narrowed the gap between creditor demands and the government’s offer from 7 points to 6 points.

The sources said the creditors also wanted to see further changes in the legal terms, a bone of contention between the South American country and its bondholders.

Creditors are worried that Argentina could use collective action clauses (CACs) to adopt what has been dubbed the “Pac-Man” strategy – attempting to get creditors on board one at a time – in the same way that the 1980s video-game character gobbled up ghosts.

CACs are designed to help push through an orderly debt restructuring by requiring only a majority of creditors to agree to change payment terms or restructuring.

“One of the red lines for creditors is that this Pac-Man strategy, which means try and use the CAC provisions in a way they never were intended to do, those holes have to be closed.”

Bondholders have also complained about a lack of engagement from Argentina’s government in recent weeks. While there has been some contact now between creditor groups and the government, no formal talks had been scheduled yet, another source said.

“The creditors are in constructive mode and looking to get this done, hopefully as soon as Argentina is ready to engage and work on what is missing to get it done,” said a second source, also declining to be named.

A deal could be struck quickly, according to a third source familiar with the Ad Hoc Group’s thinking.

“A deal can be struck tomorrow, it would be possible,” the person added. (Reporting by Karin Strohecker; editing by Sujata Rao and Hugh Lawson)

Source: Read Full Article