MercoPress. South Atlantic News Agency

Argentina Opens Defaulted Sovereign Bonds’ Swap Next Monday

Nestor Kirchner “the man who runs the show” according to financial analysts

Argentina filed with United States regulators the terms of its offer to swap up to 20 billion US dollars in defaulted debt, bringing the exchange a step closer to launching.

Argentina aims to return to international debt markets by striking a deal with “holdout” creditors who rejected a tough 2005 restructuring of nearly 100 billion in defaulted debt. The updated prospectus posted Wednesday on the US Securities and Exchange Commission's website (www.sec.gov) said the swap, which the country's finance secretary has said will open on Monday, would close at 1700 EDT (2100 GMT) on June 7.

The terms detailed in Argentina's latest SEC filing appeared to be the same as those revealed by Economy Minister Amado Boudou on April 15. Argentina got the final go-ahead from European financial regulators earlier this week, clearing the way for the simultaneous launch in Japan, Italy, Luxembourg and the United States. Turbulent global markets could affect the Argentine swap if bond prices fall sharply in the coming days, analysts say.

“With international volatility on the rise and a possibility that risk aversion could surge at any moment due to global factors, the authorities are quite right in trying to close the swap as soon as possible,” Buenos Aires-based consulting firm Estudio Ber said in a report. Argentina's swap offer also includes a plan to issue 1 billion USD in new debt, but officials have said they will only do that if the market conditions are favourable.

Eurasia Group analyst Daniel Kerner said the swap as a whole might be at some risk if the government could not secure the fresh funds at the desired rate, probably of below 10%. “We believe the swap will most likely advance. Still, we do believe it is a risk worth highlighting since it is unclear whether former President Nestor Kirchner, the main decision maker, will support the swap if he can't obtain 1 billion USD in new money,” Kerner wrote in a report.

Wednesday's filing details a special early period, giving some incentives for large, institutional investors to enter the swap. The government could then choose to announce the initial results on May 17, aiming to boost bond prices to encourage more retail investors to exchange their bonds.