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The debt swap passes to April
La Nacion
March 11, 2010

The response from the U.S. securities commission continues to be delayed, in which they asked for details on the INDEC and the reserves

Mart n Kanenguiser
LA NACION

Clutching a candle so that the recent improvement in the price of bonds continues for some weeks, the Economy Ministry plans to launch the debt swap to exit the default in April.

Facing the delay in the response of the regulatory organizations, the economic team had to push back once and again the start of this operation that is highly awaited by the market.

And while sources at the Palacio de Hacienda believe that this week could bring positive news from the U.S. Securities and Exchange Commission (SEC) they don't want to say it out loud, because it's been a month of waiting since that process ended. From the first round of questions that the SEC sent in February, there hasn't been a new turn, but the team of lawyers representing the country in New York presented in almost daily form the "recent developments" to adapt the prospectus that allows the swap to be done.

Days ago, they sent the final data on the economy in 2009 (GDP, fiscal surplus, price increases) but the restlessness of the SEC remains focused as much on the manipulated statistics as with the situation of the reserves and the Central Bank.

At the same time, they sent new data to the regulatory organizations in Luxembourg and Tokyo, where the demands are fewer because they only have to explain operational issues relative to the transaction.

"Before the end of March there should be responses from all the regulators, leaving only the details of the final offer,' said an official source who said that, despite the delays, the excitement over doing the swap remains intact.

It's the same message that they have sent out from the Finance Secretariat and through Minister Amado Boudou to investors and analysts that have come through the Palacio de Hacienda in recent days. "It's the political will to do it and the commitment of the investment funds to enter. For that, nobody is selling their bonds, there is a great expectation and the prices are being sustained," they say.

With the same optimistic vision, the sources believe that only official news from the SEC will set off a bigger rise in bonds that will allow the return of talk about the emission of "fresh money" that is now frozen. "When it becomes clear that the regulators will approve everything, there will be a spike, and in the measure of the funds confirming their commitment, this improvement will deepen," the source argued.

The doubt is in what will come on "the day after" the close of the swap, as there are some operators that believe there could be a massive sell-off of the bonds that the government delivers.

An analyst that spent several days in official chambers said that "the range of acceptance could vary between 40 and 60 percent, depending on if you include the delayed payments or not on the bond attached to GDP since 2005, and if they demand fresh funds."

The analyst recalled that if the fresh money doesn't appear under some "creative" financial scheme, Boudou will have problems selling the swap politically a the Olivos residence.

He also warned that "bond prices have incorporated the fact that the swap is happening; if it falls, there will be a heavy plunge."

With a more positive outlook, the bank Credit Suisse First Boston said that "the political storm will not end in the short term, but that shouldn't unwind the swap or the economic recovery."

"There will be a participation of 60 to 70 percent. The government hopes to bring in US$1 billion from the investors that participate in the swap, but maybe they ought to leave aside the idea of the fresh money if they can't emit a new bond at a low rate," said Carola Sandy.

As such, Walter Molano of BCP Securities said that "the issue with the SEC could be complicated by the fight with Congress or the courts, in which paying with reserves is divinely better and the fact that (ex-Economy Minister Domingo) Cavallo did it until the end of 2001." Molano predicted an acceptance rate of 65%.

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