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The debt swap continues to be stalled and the bondholders are closing ranks
Perfil
January 23, 2010

The Economy Ministry's technical staff would have liked to respond to the SEC yesterday, but were unable to do so because of the crisis with the BCRA.‪‪

By Mat as Barberia

No date set. Lorenzino says he will travel to Italy and Germany, but no flight reservations have been made, and the ambassadors are not expecting him.‪‪ In the midst of the institutional crisis over the control of the BCRA and the use of the reserves, the debt swap continues to be delayed, and now they are hoping that it will happen in mid-February.‪‪ Boudou's main goal is to put together an offer that would be attractive to holdout bondholders so that he can finally access international markets at reasonable rates, but this has been complicated by the tussle with Redrado, the resulting delays in finalizing the process with the SEC, and the strategy of the foreign bondholders who, not satisfied with the legal holds they have obtained in New York, are now trying to find a way of litigating in Switzerland as well.

The response that the Argentines must send to the SEC to obtain approval for the exchange offer prospectus suffered another set-back yesterday, because of the uncertainty caused by the situation with the president of the Central Bank, Redrado.

Under the command of the Finance Secretary, Hernan Lorenzino, the Treasury technical experts were working to try to respond to the latest SEC communication that arrived at the Economy Ministry a week ago, with comments on the veracity of the INDEC statistics.

The official intention was to respond yesterday, and in spite of the fact they were unable to do so, the Minister expressed confidence that they would be able to do so first thing Monday morning in New York.

Boudou's spokesperson was trying to display calm with respect to the future of the initiative: "In the 2005 swap, we went back and forth with the SEC three times, with comments and requests for additional information, and we understand that the same thing is happening now," he said.

Nevertheless, the Ministry admitted that the presentations to foreign bondholders have not yet been scheduled. They already visited London some weeks ago, and Germany and Italy are to follow, this week or the next. However, as of yesterday there was no official confirmation of the trip and there are speculations that it will be delayed one more week.‪‪

The ones who have decided to visit the bondholders and government officials in these two countries are representatives of the American Task Force Argentina (ATFA), which represents US bondholders. The informational meetings so far have taken place in Rome, but they will also be going to Brussels and Germany over the next few days.

Robert Shapiro, co-president of ATFA, told Perfil that the main issue discussed in the meetings is the reserves that the BCRA has on deposit in Basel, Switzerland. "The Argentine government is abusing the BIS; while all the other banks keep 2 to 3% of their reserves there, Argentina keeps 80% of them there," he said. He will continue his tour and try to persuade bondholders and local officials to take action against Argentina in Switzerland.‪‪

In the U.S., they believe that the SEC will ask for more paperwork

PERFIL consulted specialists and interested parties in New York about the conflict over the swap of Argentine debt in default. An attorney, a representative of a risk rating firm and an economist at an investment bank gave their opinion that Argentina's intentions to bring the swap forward will be hit with difficulties, agreeing that it could suffer delays at the Securities and Exchange Commission (SEC) and they differed on if the operation will finally come together.

Eduardo Vidal, partner at the law firm of Hughes Hubbard in New York, said that there are few chances "between 10% and 20%" that Argentina will go back to placing debt on Wall Street.

"The more likely thing is that the SEC blocks new emissions by the Argentine government if it finds that it has not been honest and frank in its numbers," he said, pointing to the INDEC.

More benign with the government's intentions, Boris Segura, a senior economist for the Royal Bank of Scotland, says that the SEC will raise some "warning flags" but he doesn't think that the commission will up-end the swap because it would be "catastrophic" for Argentina. Segura recommends to his clients to buy Argentine debt always and without delay when the swap comes forward.

For his part, Gabriel Torres, vice president and senior analyst for Moody's, believes that it will be "difficult" to launch the swap in February, for the lack of credibility of the numbers from INDEC, which will throw sticks in the wheel for the approval of the paperwork at the SEC.

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