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Argentine creditors build ‘Pac-Man’ defences as country readies final offer

(Updates to include gov plan to present new offer to SEC)

By Marc Jones and Jorge Iorio

LONDON/BUENOS AIRES, July 3 (Reuters) – Argentina’s government is reading a final debt restructuring offer to creditors which could be formally sent to U.S. regulators within days, a government source told Reuters on Friday, even as increasingly splintered bondholders tabled another proposal of their own.

Argentina will present its new offer to the U.S. Securities and Exchange Commission in the coming days, according to a government source. A day earlier, a source close to the negotiations said the government was “crafting the definitive and final offer” to creditors.

Meanwhile, a new counteroffer by bondholders, which Reuters reported had been tabled on Thursday, will provide the government with $39 billion of cashflow relief over the next eight years, the Argentina Creditor Committee (ACC) said. It includes a requirement that two-thirds of bonds participate in any deal.

Debt specialists see the participation threshold as important. If the government did not accept it they say it could signal an intention to adopt a so-called ‘Pac-Man’ strategy’ whereby the government tries to get investors to deal with it one at a time.

“The ACC continues to believe that the best way forward is a consensual resolution,” the group said in a statement.

Sources on Thursday said the new ACC offer valued bonds at around 54.5 cents on the dollar. That would be a modest drop from its previous offer of around 55-56 cents but would still be above the government’s last proposal of 50 cents plus sweeteners.

The ACC added that its offer would leave creditors with a weighted average coupon of 3.95% on their bonds with a 5% maximum. Eligible bonds would also maintain their original indentures – the contract associated with the bond – meaning they would not have inferior legal guarantees.

The move comes at a crucial stage in the $65 billion debt renegotiations with the Argentine government.

Talks have been extended a number of times in an effort to reach a deal, though the two biggest creditor groups, the “Ad Hoc” and “Exchange” groups, which hold a combined $21 billion of the $65 billion, have complained this week of lack of engagement from the government.

Sources familiar with the thinking of those two groups have told Reuters that they still want a better deal than the ACC proposal.

They also say that if Argentina’s next offer is not up to scratch they will have a so-called “lock up”, which would prevent any of the individual firms in the groups peeling off and accepting a deal if the government did try the Pac-Man approach.

(Additional reporting by Karin Strohecker, Jorge Iorio in Buenos Aires; editing by Carolyn Cohn, Hugh Lawson and Chizu Nomiyama)

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