Orderly default
sought by government

Advisory firms were hired

to help negotiate debt rescheduling

The government is looking not to pay the Eurobonds coming to their maturity this year.

“We are looking to reach an orderly default, in agreement with debtors,” said a minister on background. “This is why we have hired Lazard and Cleary Gottlieb. They will advise the government on the best way to negotiate and reschedule future payments,” he said.

The minister confirmed other reports that no official decision has been taken at the level of the Council of Ministers, but that all parties represented in the government agree that the country should not pay the upcoming obligations. “We should also not just default, without agreement with debtors, because this would create chaos, and a further decrease in our ratings,” he said.

A meeting held last week between the Ministry of Finance and one of the foreign debtors, the Ashmore fund, did not lead to an agreement. The ministry sought a unilateral postponement of payment for six months to one year. The Ashmore Fund did not agree. The fund is the largest non-bank (and largest foreign) holder of Eurobonds coming to maturity this year. It holds 25.3 percent of the March 2020 Eurobond series, 27.3 percent of the April series, and 29.8 percent of the June issue. This places it in a strong negotiating position because any agreement to change terms, including rescheduling, must include at least 75 percent of bondholders.

The Central Bank and a number of bankers have advocated honoring payment commitments. Both hold Eurobonds in their portfolios, and would be forced to mark-to-market (reduce the value of the Eurobond assets in their balance sheets) by substantial amounts.