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U.S. approves the offer to the bondholders. It launches in 15 days
Ambito Financiero
March 22, 2010

The SEC gave its approval to the last request of information. They will also authorize it in Europe.

by Mar a Iglesia

Canc n, M xico In the first week of April, the government will finally announce the offer for the reopening of the swap of the debt for the holders of bonds that didn't enter in 2005. So was announced by Economy Minister Amado Boudou yesterday, accompanied by Finance Secretary Hernan Lorenzino, when they said that the SEC approved the last request for information that it had solicited from the Palacio de Hacienda.

The data had been well-guarded since Friday by the minister and his closest collaborators. Bt they preferred to be at the seaside of this tourist city to announce that the SEC approved the last request for information. "It's important to point out that in this opportunity, there was only one exchange with the U.S. regulator. In 2005, there were four," Boudou explained with a wide smile to this newspaper. So things, "the swap," he added, "now enters an irreversible process."

Part of that process has to do with the details of the offer, which can't be released until it is not made public through the regulatory entities. What is known is that what is proposed to the bondholders with titles still in default can't be better than what those who entered the swap in 2005 accepted, with the offer designed by Roberto Lavagna. The bonds to be offered will be Discounts in dollars and euros, and Par, also in those currencies. According to Boudou yesterday, "Argentina will not give commissions and the interest that is recognized will be paid with bonds, not cash."

With the presentation before the SEC approved and the equivalent already done in Luxembourg, what is left is for it to be done tomorrow in Italy (today is a holiday in that European country) in the CONSOB, which is the regulatory entity in that country. When all have given their approval, which in general happens once the American organization does it, as has already happened, that can make the offer to the holdouts public.

In 2005, the bondholders that entered the swap accepted a haircut of 65%. By law, the new offer cannot be better than the one of five years ago, because it would also mean an attraction for the bondholders that at that time decided to join that offer. That operation had an acceptance of 76%, which left around US$20 billion still in default, which they seek to bring into the new offer. For boudou, if US$12 billion of this remaining total enters, he'd be satisfied and would take this reopening as a success. "The swap seeks to maximize the level of acceptance of the debt in default," he remarked.

The haircut of 65% is not equivalent to the market value of the bonds. While the primer ended up making reference to the savings, in fiscal terms, that would come to the Argentine state, a bond operating on the secondary market finds its market value.

Faced with a question from this newspaper regarding the bondholders in default that are suing in New York in the courtroom of Thomas Griesa, which add to another US$3 billion, the minister explained that they hope for an ample acceptance of the swap in order to weaken the holdouts. "If the judge finds that 3 billion of the 120 original billion falls out, he's going to deduce that if they didn't accept, it was because they didn't want to," he said.

With respect to the possibility that Barclays, Deutsche and Citi the three banks that are orchestrating this swap manage to get US$1 billion in cash for the Argentine state that they put forth to the investors in this operation, Boudou and Lorenzino explained that it will depend on the rate of return in the market at the moment of the offer.

Yesterday, in this city there was a new meeting with bondholders, mostly institutional ones, after the meeting that was held in the beginning of October last year at the IMF meeting in Istanbul. "The investors could confirm what we said to them some months ago," Boudou said.

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