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Swap: bonds returned to those with buyer's regret
Ambito Financiero
July 09, 2010

A group of bondholders that entered the recent debt swap regretted doing so and will get the bonds they'd already held in return. They are creditors that are among the so-called "retenders", which is to say that they'd already accepted the 2005 swap and asked to swap the bonds they received then for the ones offered in the new operation.

In total, there were US$600 million in those who entered the swap under those conditions. Of that total, around US$200 million regretted that decision and asked a New York court to disarm the operation, which was accepted by Argentina. The prospectus of the new swap provided for the possibility of an investor being able to step back from their decision if in the middle of the process they believed their decision was a mistake.

The participation of these investors in the swap surprised officials at the Economy Ministry who were running the transaction. The motive is that the new offer is clearly worse than the one held in 2005, at least in terms of instruments to be delivered. This swap, for example, didn't make payments on the GDP coupons accumulated in the last three years. And the expired interest were not paid in cash but were delivered through a new bond in exchange, the Global 2017.

Many large investors, however, thought that this new offer was bigger, that the market value of the same was, at the time of the start of the operation, superior to the one in 2005. However, in terms of the papers that they'd have to receive in the transaction they clearly came out losing.

"The return of these titles to retender investors doesn't mean a reduction in the percentage of acceptance of the swap, which remains at 66.8%," explained sources at the Palacio de Hacienda. The amount that comes out of this percentage is of some US$12.2 billion of a total of US$18.3 billion in bonds eligible for the swap. However, Hacienda's statement put out last Monday spoke of a total acceptance of US$12.862 billion. Mistakenly, on the basis of that figure some believed that the acceptance of the offer had risen to slightly more than 70%, when in reality it had remained at 66.8%, which Economy had already reported.

The difference of US$600 million was from this group of "retenders", which in any case were not added to the final acceptance percentage. "To us it was surprising that these investors appeared to return to participate in the swap, because it was clear that the offer was worse than in 2005. But they had the chance to opt for this new swap and thus they did so, while with the passage of a few days many regretted it," said sources at Finance. The most surprising is that almost the whole of those who returned weren't small investors, but large holders of bonds, some even with more than US$100 million in Argentine paper. As such, it was that much stranger that they didn't have adequate information. This group of large investors had the chance to enter the transaction until the end of May, when the so called "early round" of the swap concluded.

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