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Montevideo, November 16th 2018 - 16:36 UTC

Argentina makes emerging-market record US$ 16.5b debt sale and ends litigation with bondholders

Wednesday, April 20th 2016 - 06:58 UTC
Full article 12 comments
“We are resolving three issues at the same time: the 2001 default, the default of the previous government and we are returning to the market” said Minister Prat Gay “We are resolving three issues at the same time: the 2001 default, the default of the previous government and we are returning to the market” said Minister Prat Gay
The minister praised Congress for its support which opened the way for the biggest demand ever seen for a bond or stock offered by an emerging market government The minister praised Congress for its support which opened the way for the biggest demand ever seen for a bond or stock offered by an emerging market government
Macri told business leaders that “they had no more excuses and had to begin investing; we did our job, we're back in world markets the relay is now with them” Macri told business leaders that “they had no more excuses and had to begin investing; we did our job, we're back in world markets the relay is now with them”

Argentina announced on Tuesday the largest emerging market debt sale on record with a global offering of 16.5bn dollars at an average interest rate of 7.14%, well below what it had planned in March in the midst of negotiations to end litigations with holdout funds opening the way, after fifteen years, for the return to world money markets. Underwriters received 68.5bn dollars in orders for bonds, more than four times the value of the debt.

 “We are resolving three issues at the same time: the 2001 default, the default of the previous government (…) and we are returning to the market, with resources that this issuing will provide for the infrastructure plan (…), to create more jobs and finance the deficit” said Finance minister Alfonso Prat Gay at a press conference in Government House in Buenos Aires.

The giant bond offering is a milestone achievement for Argentina, which defaulted on more than US$ 100bn in sovereign debt in 2001, the largest government default at the time.

The minister who was accompanied by members of his negotiation team said that despite the over bidding, “we preferred to be cautious so that other interested groups, such as provincial governments and the private sector” can have access to financing for investing in Argentina.

Prat Gay also praised the Argentine Congress for its support which opened the way for the very successful transaction and the biggest demand ever seen for a bond or stock offered by an emerging market government or company, and probably one of the 20 biggest in the world generally.

He recalled that when the team took off they were told they would never get the money needed and that the going rate would be at least 8.5% for the ten-year bond, “and we managed 7.14%, which we will continue to try and lower”.

Prat Gay was referring to similar earlier operations by YPF, at 8.5%, another by the former government of Cristina Fernandez at 9.25% and the 16% paid on loans from Venezuela.

Of the four sovereign bond issues, the ten-year 6.5bn averaged a rate of 7.5%; the three year 2.75bn bond and a five-year 4.5bn went at 6.87% while the 30 year 2.75bn bond, 7.62%.

The minister said bonds' issue ends all litigations with holdouts and for the very few that are left, the proposal remains open with a 40% haircut.

With the rest of the funds “we are going to launch an ambitious public works program, and we trust it will be our last overseas issue this year” since the monetary program includes bond sales in the domestic market.

Prat Gay said that of the 16.5bn dollars, 65% are from US investors; 25% from Europe and the rest is split between Japan and Latin American countries.

The minister likewise revealed that during the meeting on Monday with president Mauricio Macri and different business leaders it was made clear that besides looking after jobs and prices, “they had no more excuses and had to begin investing; we did our job, we're back in world markets the relay is now with them”.

And if the locals don't do it, “I'm sure international groups will move in. We have never seen such interest in making direct investments in Argentina; this is very different from the nineties when it was mostly financial, now it's for real”.

And the same way “we made a road show to attract interest and bids in bonds, we´re preparing a road show to sell Argentina's infrastructure projects overseas so we can ensure jobs, and combat poverty”.

Finally, Prat Gay said Argentina was at the end of “a dark path and at the beginning of a very encouraging venue” after wrapping up litigations with holdouts and in “the freeway to access world financial markets”.

Top Comments

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  • Skip

    Not bad. Congrats Macri.... problem solved within first 6 months of taking office.

    Apr 20th, 2016 - 08:58 am 0
  • zathras

    It is amazing what someone vaguely competent in charge will do.

    TMOBA really screwed things up for Argentina.

    Maybe, just maybe this is the first step, towards Argentina gaining some respect

    Apr 20th, 2016 - 10:48 am 0
  • Think

    TWIMC
    Article is titled...:
    “Argentina makes emerging-market record US$ 16.5b debt sale and ends litigation with bondholders”

    Well.....
    Wish that was the truth... but reality is that...:
    1) The previous administration settled litigation with ~93% of the original bondholders...
    2) The current administration has just settled with ~4% of the “Hold Out” bondholders...
    3) There are still 3% (3 ,000 million U$) unsettled bonds out there..., issued without any Colective Action Clause..., in the hands of Hard Line Hold Out bondholdes that, in theory and in praxis, could start all that circus again...
    http://www.infobae.com/2016/04/18/1805198-el-peligro-los-holdouts-fantasma-preocupa-al-gobierno

    Let's wait a wee bit and see what happens with them...

    Apr 20th, 2016 - 01:11 pm 0
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