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Economy Ministry is already sounding out investors about placing a bond abroad
El Cronista
July 22, 2010
They've contacted potentially interested investors about buying the new bond. They are waiting for a good market climate with which Argentina self-finances in the coming weeks.
By Juan Cerruti
The strength shown by Argentine bonds these days activated the government's contacts with investors to sound out the appetite of the market for an eventual emission of a public bond abroad. Yesterday, the Global 2017 the bond that the Economy Ministry wants to place abroad closed with a yield of 10.5%. It is only 50 basis points from the one-digit interest rate that the Palacio de Hacienda imposed on itself to consider refloating the operation. An additional rise by the bond of 3% would place it in the emission zone.
What is certain is that they've quietly started contacts with the three investment banks that participated in the swap that ended recently and with other large international operators to hold the placement in case the interest rate pierces the 10% floor, and always that conditions remain relatively stable under that level.
A date that enthused Minister Amado Boudou and his team in recent days was when Argentine bonds resisted the financial turbulence that passed over Wall Street from the singing of the financial reform package that U.S. President Barack Obama had sought, and the release of some economic figures that disappointed investors.
The official intention is to place an emission of the Global 2017 for an amount around US$1 billion. According to what they say in official corridors, that is not responding to an overriding fiscal need, but the intention to begin repairing the voluntary debt market for Argentina.
The advantage of emitting the Global 2017 rests in that all of the papers have already been presented and they have the approval of the main regulatory organizations of the world, in particular the U.S. Securities and Exchange Commission (SEC).
In parallel to the possibility of going out to emit a bond abroad, the Economy Ministry is working together with the law firm advising Argentina in New York (Cleary, Gottlieb, Steen & Hamilton) to present a brief in the coming weeks to the courtroom of Judge Thomas Griesa, where the lawsuits against Argentina in the United States are concentrated.
The move is designed to force a decision by the U.S. courts in favor of the country having definitively come out of the default, after the last swap came together and with which they managed to get a global adhesion (also counting the restructuring of 2005) of 92%. It is seeking to corner the vulture funds that still have bonds in default for around US$4.5 billion and thus close off the avenue for embargoes against the country.
The official thesis is that with this grade of adhesion, Argentina already has showed good will before the international financial community to pay and as such those who didn't enter until now will not do so in the future, even when they are given another opportunity.
Last week, the risk agency Fitch (one of the three most important in the world) raised Argentina's debt rating and took it out of the default category, which reinforced the more optimistic view of the market about the country. Fitch rose its rating for long-term debt in foreign currency from RD (Restricted Default) to B, while obligations in local currency rose to B from the B- it held previously.
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