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Key week for the swap: offer is carried to the SEC to open it by the end of the month
El Cronista
January 04, 2010

The proposal, which will round out to 50 dollars, will be formalized in the coming days with the goal of getting approval from the U.S. stock exchange agency next week

ESTEBAN RAFELE Buenos Aires

The swap of US$20 billion in public titles still in default is entering a decisive stage this week. The Finance Secretariat, at the Economy Ministry, will present to the Securities and Exchange Commission (SEC) the prospectus with the details of the offer that will be made to the bondholders that didn't enter the 2005 oepration. Once the SEC gives the okay, Argentina will open the swap at the end of January, said Minister Amado Boudou.

The Finance Secretariat, charged with bringing forward the technical details of the operation, has been working on the final details of the offer, with the hoal of presenting the prospectus before the SEC at the end of this week. Once Argentina completes the fine-print of the offer for the U.S. regulatory agency, it will be public.

By the middle of the month, the securities regulator for that country should "return" the offer. If there are no technical or legal questions, it will approve the Argentine proposal to swap bonds in default and permit the operation. Then, the last week of January the swap will finally open.

Argentina will offer the holdouts an offer that will round out, in market value, to US$50 for every US$100 in default, but that will represent a nominal haircut over 65%. They will issue a Discount bond and other one for interest over the seven years, while smaller investors will get one for just three years through a Par bond. Still left to be decided is if theyu will include in the package a bond with payments corresponding to the GDP Coupon between 2005 and 2007. The 2008 payment, made last month, will enter.

In an interview with Reuters, Boudou said on Friday that he intends to launch the operation at the end of the month. Thus, he said that he hopes the SEC approves the offer between the 12th and the 15th and when that happens he will travel to the United States, Europe and Japan. He will also participate in the road show of Finance Secretary Hernan Lorenzino and undersecretary Adrian Cosentino.

They will hit various European destinations where the larger part of small bondholders are concentrated: Germany and Italy. To manage the acceptance of the small investors is key for the operation's success. As the government has placed a goal of reaching 60% adhesion with the entrance of 50% of the bonds in default already guaranteed by the banks that presented the proposal, Barclays, Citi and Deutsche, the market will view an acceptance of 75% very well, which will leave the amount still in default to be very small.

Obstacle

However, the judicial round that began over the US$6.569 billion fund made up of Central Bank reserves to pay debt maturities in 2010 could upset the situation. On Wednesday, the Supreme Court gave the Executive ten days to explain the measure, to decide whether to intervene from a request by the province of San Luis to block that operation.

This is also the hindsight view of the Central Bank itself. The president of that entity, Martin Redrado, charged the legal teams at the bank and their lawyers in New York to study the DNU that created the Bicentennial Fund.

The Court will not rule on this until after the judicial holidays this month, but put the squeeze on the government at the time when the Economy Ministry has to try to seduce the financial community.

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