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The government retouches the swap offer: they will take out the last GDP coupon payment
El Cronista
April 01, 2010

By decision of N stor Kirchner there will be a trimming of the proposal that the banks made. But it will not affect the operation, which is being reduced only $3 in the official package.

LEANDRO GABIN Buenos Aires

The debt swap enters its decisive phase and the government finalizes the details of the offer. As this newspaper reported two weeks ago, the rise in bond prices gave way to a final retouching on the proposal to not sanction such high prices. Now, according to what has come out, they will cut the last GDP coupon payment that two weeks ago was part of the offer. What is certain is that the original plan, thought up by the advising banks (Barclays, Citi and Deutsche) together with the economic team, contemplated paying all the late interest from this instrument. A first major increase of the bonds made them study only the possibility of paying for growth in 2008 (which was paid last December). Now, with the price hovering around US$52 for every US$100, the political decision is to prune the offer. Anyway, official sources say that this will not modify the level of acceptance. The last payment of the coupon is worth some US$3 in the offer, with which the packet at today's prices comes to US$49. Taking into account that many investors bought their bonds in default for less than US$30, the operation continues being very attractive. "We believe that the transaction will easily surpass 60% of acceptance," official sources said. Among the banks that are leading the operation, they are talking about an adhesion of 80%.

What is certain is that next week will be decisive for the swap. Already with the offer virtually decided in full, the economic team will present the last documents in the international arenas (U.S., Japan, Italy). It's believed that in the course of the week they will come to complete those presentations, and that the international regulators will take between three and four days to give final approval. From there, between the 12th and 14th of April, they will officially launch the operation. In all, the transaction will last four weeks: the institutional investors will have to enter in the first week or ten days at the most and the small investors will have three weeks. The plan is to take advantage of how the large funds carry about US$14 billion in default, and upon entering, the Economy Ministry could show a high level of "early" acceptance and this would have a psychological effect on those small investors that are wary of accepting.

With respect to the new bond, the Global 2017, it would have a coupon of between 8.5% and 9.5%, which if they emitted it today it would have a rate of 10%. They are seeking to launch it during the period of receiving the offers for the swap, under the idea that there would be a rally of the bonds that would lower Argentina's rate. It also came out that there would be an "armoring" via the courts to head off the vulture funds embargoing the US$1 billion that would come in for the new emission. It involved, at the end of the swap, making a deposit in New York with the offer to those funds that don't accept entering under the idea of showing "good faith" before the international courts.

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