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Hoping to launch the swap in three weeks with large investors
La Nacion
February 27, 2010

Economy Ministry confident it will receive U.S. approval and obtain $10 million

Mart n Kanenguiser
LA NACION

The government is preparing to receive a quick reply from the U.S. securities commission with the intention of holding the swap of debt in default with large investors before the end of March, despite the doubts in the market about the political will to bring it forward. Then, the operation would fall open to the rest of the bondholders.

The day before yesterday, Economy Minister Amadou Boudou reiterated that the backing of the U.S. Securities and Exchange Commission (SEC) will come "in the coming hours". It seemed that the date would be the day after tomorrow (Monday), according to sources connected to the transaction.

When this approval is counted in and also from the organization in Luxembourg which according to the Economy Ministry could move in a speeded up fashion the first stage would come in which the big investors would enter, as committed to by the organizing banks.

The minister said that between US$8 billion and US$10 billion are committed to be swapped, in exchange for a commission for the Barclays, Deutsche and Citi banks. It's half the principal of debt that didn't enter the swap of 2005. The executives at Barclays, the leader of the group, assured the minister and the team at the Finance Secretariat that those investors "are enthusiastic" and want the operation to be held "as soon as possible". In turn, the enthusiasm of the smaller investors is uncertain.

Perhaps intoned by the result of that meeting, the minister set aside subtlety yesterday when inaugurating a commercial center in Vicente L pez: "We didn't pay attention those who predict the apocalypse, because Argentina is going to continue growing and generating jobs."

Despite the drop in bond prices registered this year over the dispute over the Central Bank's reserves and the worsening of external conditions from the Greek crisis, the banks also told the minister that it was possible to get the "fresh money" of US$1 billion. "There is a way to put this emission together at an interest rate of around 12%, but it remains to be seen if the government is ready to get behind it,' said a source in the sector.

For its part, the task for the Economy Ministry is to focus on completing all the bureaucratic processes also in Italy and Japan and then evaluate if the market conditions allow for dreaming of an adhesion rate above the 50% mentioned by Boudou. Also, they ruled out the large investors being nervous about the SEC's delays, as their worry is focused on the political decision to hold the operation or not. "And what we repeat is that for the last 90 days we have been working without any counter-orders to get it done," argued the official source.

But the fear in the private sector is that ex-president Nestor Kirchner will order them to step back, due to the small chance of emitting debt at a single-digit interest rate on the voluntary markets.

However, Hans Humes, of the fund Greylock Capital, said that "Argentina has little debt on the market, for which any rational investor should enter the swap, still with the high current country risk." Partner of the controversial Italian Nicola Stock, he said that his group will join "depending on the conditions" for the smaller investors.

Meanwhile, Daniel Kerner, of the Eurasia consulting group, said that the uncertain Bicentennial Fund reduces the importance of the swap among the government's priorities.

More severe, ACM consulting said: "The possibility of reinsertion of our country into the markets and getting genuine financing for the public accounts has been complicated in a substantial way."

Other analysts added that the offer has a market value of around US$45 and that, while the swap would happen, there could be a rapid and massive sell-off of the new bonds.

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