MercoPress. South Atlantic News Agency

Argentina’s default restructure: 9.5% dollar bonds due in 2017

Economy minister Amado Boudou

Argentina will offer 9.5% dollar bonds due in 2017 in its plan to restructure 20 billion USD in defaulted debt, Ambito Financiero newspaper reported Tuesday. The bonds will be issued to compensate for past-due interest and the most recent past-due payment on warrants linked to economic growth, the Buenos Aires newspaper said.

They will also be offered in a sale of some 1 billion USD in debt that will be held after the settlement, Ambito said, without specifying where it obtained the information. The sale was originally set to coincide with the exchange.

Individual investors will be offered bonds due in 2013, the newspaper said.

Argentina's government is trying to clean up defaulted bonds so that it can return to international markets for the first time since its historic default around the start of 2002 and raise money as it faces tight financing this year.

Argentine benchmark bonds rallied and touched 10-week highs after the offer was made public on Tuesday in a filing with Italian regulator Consob.

Bondholders are eager to see how the offer compares to an earlier restructuring in 2005 that was rejected by about 25 percent of investors, known as holdouts, owning defaulted Argentine paper.

Italian investors were among the vocal holdouts. They included many individual Italian “retail” investors who bought the bonds sold by big Italian banks.

The swap aims to take off the market Argentina's defaulted debt, neutralizing legal challenges to new Argentine bond issues eight years after the country's 100 billion USD default hurt bondholders from Italy, Japan, the United States and elsewhere.

The Argentine government is hoping that more than 60% of investors holding its defaulted debt will enter the new swap, but a lot will depend on how the offer treats past-due interest, or PDI, analysts said.

Argentina faces an estimated 15 billion in debt obligations this year and analysts and economists say it needs to raise some 7 billion to meet payments.

Speaking from the Inter-American Development bank annual assembly in Mexico, Economy Minister Amado Boudou said that “Argentina has the macroeconomic requisites to put forth a single-digit index”.

Finance Secretary Hernán Lorenzino, also in Mexico, showed optimism in terms of the debt swap and believed that it will reach at least a 60% acceptance level, while ratifying that one of the characteristics of the new offer is that ”banks will not be paid commission.“

”With a 60% acceptance rate, and keeping in mind 2005's swap, this could be considered positive, because no restructuring project reaches 100 percent,“ said Lorenzino.

When asked about whether or not banks would be receiving commission payments, Lorenzino said that ”I am thankful for this question because, although Economy Minister Amado Boudou has already cleared it up, it looks like there are still doubts.“

”This project was designed so that Argentina would not pay commission to banks that are part of the organization, and it is one of the differences with the swap from 2005, it's one of the benefits,” he said.