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Argentina taken out of the default zone and emitting a bond abroad is revived
El Cronista
July 13, 2010

Better climate reigns on the market. The interest rate for the Global 2017 is at only 100 basis points from the goal that the government set for going out to emitting a bond at the international level.

JUAN CERRUTI Buenos Aires

The risk agency Fitch (one of the three most important at the global level) yesterday raised Argentina's debt rating and took it out of the default category, which reinforce the more optimistic view of the market about the country that has been developing for weeks. After the news came out, Argentine bonds had another favorable trading session which left the Global 2017 bond close to the target interest rate that was self-imposed by the Economy Ministry for an attempt to emit a bond on the foreign markets.

In the last two weeks the price of the Global 2017 rose 8% and yesterday closed with a yield of 11% annual. It's only 100 basis points from being at one digit, which according to the government itself would be an acceptable interest rate to place a bond at the international level.

As El Cronista reported in its June 25 edition, it was highly probable that after the debt swap came together recently that some risk agencies would improve Argentina's rating. Fitch rose the debt rating from RD (restricted default) to "B" for long term debt in foreign currency, while the obligations in local currency rose to "B" from the previous "B-".

Fitch argued that the new rating "represents a positive step towards normalization of Argentina's relations" with its creditors and with the international financial markets. It also said that through the swaps held in 2005 and last month, the country took more than 92% of the bonds that fell into default at the beginning of 2002 out of the market. The adhesion to the debt swap that closed a couple of weeks ago rose finally to 70.2%.

However, the rating agency recalled that some US$6 billion remains in default, mostly in the hands of the vulture funds that are suing the country in international courts. But it estimated that the financing needs facing the government in the coming two years "appear manageable", in particular by the funds obtained through loans given by various official dependencies and for the use of freely-available reserves.

Another risk agency, Moody's, is also reevaluating Argentina's rating and could announce an improvement in the coming weeks. While Standard & Poor's already said that for the moment there would not be changes in the grade given to Argentine debt.

"The new Global 2017 bond is capturing the glance of more and more investors, already showing falling yields since its launch. This is leaving it floating around a rate of 11%, that has shrunk the spread to about 100 basis points from the goal of returning to the international markets at the cost of one digit, requiring an additional rise of only 5%," said the Ber Firm in a report released yesterday.

"We hope that in case the international climate goes on, the authorities could launch a quick emission taking advantage of this window," the consultancy added, which is run by Gustavo Ber.

The intention of the government is to pull together an international placement of the Global 2017 by the end of the month for an amount that comes to around US$1 billion. According to those in officialdom, that would not be for any imperiously fiscal need but for the intent to start rebuilding Argentina's debt market.

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