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Emission being prepared for US$1 billion and seeking to refinance US$3 billion more
El Cronista
August 12, 2010

In 15 days the operation could begin. The new bonds will be for 7 and 10 year terms, until 2020. They will swap Boden and Bonar for bonds under US legislation.

JUAN CERRUTI Buenos Aires

At the Economy Ministry they have under study a series of financial operations that could come to light in the next 15 days. The key date, if the market climate doesn't worsen, is between the last week of this month and the first of September. Not only does it involve the emission of the Global 2017 for US$1 billion, but that now in the government they are looking with interest at the strategy of moving ahead in parallel with the swap on various bonds that come due next year. The idea is to spread out the maturities for all that is left in the term of Cristina Fern ndez de Kirchner.

The main candidates to be swapped are two: the Boden 2012 and the Bonar V. The first ones come due with US$2.5 billion in 2011 and the second for US$500 million. Adding in the US$1 billion that would be offered by the Global 2017, they total emissions of US$4 billion for the rest of the year. The bulk will be the change of the Global 2017, but at the ministry they don't rule out also launching another paper with a longer term, possibly 2020.

Finance Secretary Hern n Lorenzino and Finance Undersecretary Adri n Cosentino met on Monday with a contingent of investors that were brought to the country by Deutsche Bank. They showed their interest to the officials over an eventual Argentine emission. The meeting was added to the one that the same officials held days earlier with other groups of investors from Morgan Stanley and JP Morgan.

The strategy is to swap bond in dollars and pesos with local legislation for bonds in dollars under New York legislation for those that would be eligible and to increase the weight of Argentine bonds on the EMBI index that JP Morgan puts out. That would ensure an almost automatic demand that many international funds by their rules must replicate this indicator in their portfolios.

The mechanism to put the emissions and swaps together would be the same that was used until now that "shields" the operation from eventual embargoes: to make the trade (both the deposit of the old bonds and the delivery of the new ones) on the local market (possibly the MAE), where the vulture funds have no access.

Yesterday, Argentine bonds fell for the second consecutive day, hit by an international climate of pessimism, rooted in the doubts over the recovery of the economy of the United States and the reaction that the Federal Reserve had, to which was added some negative news about Chinese industry. The Global 2017 closed at US$94.25 for a face value of US$100, and its yield rose lightly to 9.92%.

In recent weeks various countries have gone to the market to place debt with success. For that, in this context the official merit (beyond the recently completed debt swap) became something relative. Above all if one takes into account that only a few weeks ago, countries like Belarus, Croatia, Poland and Turkey placed bonds at a similar rate that Amado Boudou now aspires to, around 9%. Today even the bonds of El Salvador, Guatemala or Jamaica yield 10%. The stars without a doubt were Brazil and Chile with emissions with spreads of only 150 and 90 basis points above the U.S. Treasury.

"It would be an exaggeration to credit the good performance of our paper to the developments that are coming from the local economy," said ACM consultants in their recent report. "Beyond these questions, what is clear is that the return to one digit is welcome any time it not only opens space for the Republic to place debt, but also provincial governments and businesses in the private sector," it said.

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