MercoPress. South Atlantic News Agency

IMF Anticipates Good Prospects for Argentine Defaulted Bond Swap

No linkage between Latinamerica and Southern Europe

Given the high levels of global liquidity, Argentina should succeed in restructuring its 20 billion US dollars in defaulted bonds according to a senior official from the International Monetary Fund.

However Nicolás Eyzaguirre director of the International Monetary Fund (IMF) Western Hemisphere Department warned that even when the bond swap of approximately 18.3 billion USD can be expected, this won’t be sufficient to enable the Argentine Government to resume full access to voluntary capital markets.

“A more active participation in the international community, where everybody is more on top of what are their policies and what are their policy intentions going forward, would help them a great deal,” said Eyzaguirre during the briefing of the IMF outlook for Latin America. “Spreads are still very high notwithstanding the fact that everybody is pretty much believing that the holdout deal is going to turn out fine.”

Eyzaguirre revealed the IMF is in talks with Argentina to send officials to help the country improve its economic data. The IMF hasn’t performed an annual review of Argentina’s economy since 2006.

Argentina unveiled April 15 the general terms of a restructuring offer on 20 billion of debt, nine years after the government defaulted. Argentina’s offer—as measured in net present value terms—is worth about 49 cents on the dollar for institutional investors, according to RBS Securities Inc. The value of the previous 2005 bond exchange was 59.63 cents on the dollar, Credit Suisse Group AG said.

Argentina's government launched a road-show Monday in Rome to promote the swap, which runs through June 7.

With investor risk appetite remaining high despite Greece's debt problems, Eyzaguirre said he expects Argentina to get “quite a good deal” out of the exchange. He noted that bond spreads haven't shown much reaction to Greece's surging yields, given the lack of linkages between Latin America and Southern Europe as well as an abundance of liquidity. “It couldn't be a better opportunity to close the deal with the holdouts, given the amount of liquidity” said the IMF official.