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Montevideo, February 6th 2023 - 19:46 UTC

 

 

Investor's concern with the shaky Argentine economy, despite the deal with bond holders

Thursday, August 20th 2020 - 10:55 UTC
Full article 3 comments
Argentina’s over-the-counter bonds closed down an average of 0.3% and traded at around 45-50 cents on the dollar, well below the 54.8 cents net present value (NPV) Argentina’s over-the-counter bonds closed down an average of 0.3% and traded at around 45-50 cents on the dollar, well below the 54.8 cents net present value (NPV)

Argentine bonds extended a recent dip after the government formalized its US$ 65 billion debt restructuring offer, underscoring investor concern about the country’s shaky economy despite creditors’ rallying behind a deal.

Argentina’s over-the-counter bonds closed down an average of 0.3% and traded at around 45-50 cents on the dollar, well below the 54.8 cents net present value (NPV) of the government’s proposal. The country’s risk index also edged up.

Following months of tough negotiation, Argentina made a breakthrough with creditors in early August on a deal and filed a new offer to the U.S. Securities and Exchange Commission on Monday. Creditors now have until Aug. 28 to approve the deal.

The three main creditors groups who took part in the talks, including names like BlackRock, Ashmore and AllianceBernstein, have already backed the latest proposal, giving it a high chance of success.

On Tuesday one of the groups reiterated its support and said it hoped the revised terms and extended offer period “will contribute to a successful high-participation debt exchange”.

Despite the backing, however, analysts said there were concerns about falling reserves, persistent capital controls and economic recovery after the pandemic, and what that meant longer term about debt sustainability.

“The debt restructuring in itself doesn’t provide enough of a positive shock or solution to the current economic crisis,” Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont Securities, said in a note to clients.

Morden said the current pricing indicated an exit yield of nearly 12% and added that for further rises, creditors would want to see a pragmatic plan to deal with the crisis and positive news on talks with the International Monetary Fund.

“The damage to investor relations and the already weak economy from a protracted debt restructuring process now questions whether the revised repayment terms are sufficient to service still onerous payments in 2025-2035,” Morden added.

Others noted that current prices, however, were not far from market expectations throughout the negotiation.

“Investors always expected the bonds would start to trade at 12% exit yield,” said Mauro Roca, emerging markets sovereign research managing director at TCW in Los Angeles. In the talks both sides had converged on a 10% exit yield.

“That is consistent with the average price that we have now that is around 47 (cents),” Roca added.

Categories: Economy, Politics, Argentina.

Top Comments

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  • jrg973

    A faltering Economy, An Insurmountable Debt, A Pandemic...What to do?
    .
    Well if your an Authoritarian ruler you rattle your sword, bang your drum and threaten war, AGAIN, with a country that Kicked your butt before and ask for “More Please”. Why can't the Rulers of Argentina figure out how to run the Argentine properly, for the good of the People, and build a better country. No they have to be like little Boy's, (Our Idiot Trump included) and try and make war pay off...Maybe in this Brave New World they'll try something New and Exciting...

    Aug 20th, 2020 - 11:57 pm 0
  • Chicureo

    jrg973

    Can't disagree with your observation, but I hope you do recognize that Trump has actually kept the USA our of new wars AND actually is achieving military success.

    Like him or hate him, he will win the election in November.

    Aug 21st, 2020 - 01:20 pm 0
  • jrg973

    Au contraire, mon ami... Nous perdons du terrain au moment des terroristes et de nos ennemis idéologiques. Trump a aliéné ses alliés et les pays indépendants du monde entier. Regardez l’Amérique du Sud... Une fois qu’il ya un vaccin pour le virus, ils vont ramasser toutes les affaires de la Chine ... Il suffit de regarder ...

    Aug 22nd, 2020 - 07:49 am 0
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