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Swap advances: new bond will have an interest rate of 9.5%
Ambito Financiero
December 16, 2009

The swap offer to the bondholders will have a prolonged finale: according to what the economic team is planning, first will be the turn of the large investors (it will be 15 days or less), while the smaller ones will have a more prolonged period to decide. Also it came out that the interest rate for the new bond to be emitted in the operation will be 9.5%.

The goal of the phases would be to show in the quickest way possible that at least 60% of the bonds currently in default have come into the operation. This is the percentage equal to some US$12 billion that the organizing banks (Barclays, Deutsche and Citi) have already practically promised on the part of the large funds. Yesterday, executives of these entities were meeting with Minister Boudou.

Something similar was done with the swap of guaranteed loans in January. First was announced the acceptance of the big tenders and then they gave more time for the individual holders.

The offer has to be open for a longer time for the individual holders or the Italian retirees to have more time to decide," they explain from the Palacio de Hacienda. It's estimated that in Italy alone individuals have between US$3 billion and US$4 billion. The exact amount, however, is unknown as in recent months there has been a heavy shift in ownership of Argentine debt in default.

The sending of the proposal to the U.S. Securities and Exchange Commission was done yesterday and the expectation is that in one month it will give final approval. Minister Amado Boudou said that on January 12 everything will be ready to launch the transaction. That is optimistic: it depends on the time it takes for the U.S. authorities to give final authorization.

The official also confirmed that once that is achieved, he will visit the main financial markets, like London and New York, but surely the delegation will also pass through Italy and Germany.

As for the proposal, these are some of the aspects to take into account:

In addition to couting on longer time to enter, the smaller bondholders will receive a short bond (at three years instead of seven) in compensation for past due interest between 2005 and 2009, and the three GDP coupon payments. The interest rate will be 9.5%.

There will be no "cash" payments by the government. This means that even the payment made yesterday on the GDP coupon will be executed through the delivery of new bonds.

It is confirmed that there will be an emission of a bond for US$1 billion by Argentina. The small investors will not be obliged to subscribe to it, as the responsibility will fall upon the banks placing it.

The minister explained that the advance bid to pay off debt coming due in 2010 will mean a haircut of interest for the investors and could include Boden 2012 bonds and the so-called Guaranteed Loans. The first operation of this type will be next week.

What the government of President Cristina de Kirchner is doing with these measure," Boudou said, "is to move toward turning a page that has to do with the crisis that our country has had to bear." And he explained that the goal is to go back to financing itself with placements on the international market at a rate less than 10% a year in dollars.

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