Argentina creditor Greylock says default hard to avoid, but debt deal doable

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(C) Reuters. FILE PHOTO: Argentine Economy Minister Martin Guzman reacts during an interview with Reuters, in Buenos Aires

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By Cassandra Garrison and Marc Jones

BUENOS AIRES (Reuters) – Argentina probably cannot avoid defaulting on a bond payment due on Friday, but a deal to restructure $65 billion in foreign debt should still be achievable, a key creditor to the South American country said on Thursday.

“I think it’s going to be very difficult to avoid some sort of default,” said Hans Humes, who heads Greylock Capital and has played a major role in one of the main creditor committees.

“But it’s very different if you can come up with some way to cure the default in short order … I would hate to see something disorderly as a hard default.”

Argentina is racing to strike a deal with bondholders to revamp a debt burden its government calls unsustainable. It risks triggering a ninth sovereign default with a Friday deadline for around $500 million in bond payments.

The country and its creditors traded proposals over the past month and have been working toward a deal over the last week. Officials and creditors say there still is work to do to close the gap.

Humes, speaking at a virtual conference, said he thought Argentina would find consensus with creditors, though talks would spill beyond this week’s deadline.

“There should be enough flexibility to get to a deal that is acceptable,” said Humes, citing analysis from Argentina’s government and the IMF. “But we’ll have to see.”

Economy Minister Martin Guzman said this week there was a “big chance” the negotiations would extend beyond Friday, which was penciled in as a cut-off date. Others remained skeptical.

Edward Glossop of Capital Economics said in a note on Thursday that a default would not surprise the market, where Argentine bonds are trading at distressed levels.

But he said talks could drag on and losses could be bigger than expected, with international bond values “as low as 30 cents on the dollar.”