Italian Retail Rejects Argentina Offer

Italian retail holders of some $4.5bn in nominal value of defaulted Argentine debt have not yet been approached by the debtor, but they will not accept the offer in its rumored form. “This is mostly for institutional investors,” says Nicola Stock, president of Task Force Argentina, which represents 190,000 Italian holders, many of them pensioners, with $4.5bn in bonds. “The offer is less attractive than the 2005 offer. It is absolutely not interesting for the retail bondholders,” Stock tells LatinFinance. The deal is expected to involve a 66% haircut in exchange for discount bonds – no pars or quasi pars – and zero PDI. Interest from 2005 to the present would also be paid in discounts. Participants are also being asked to pay 25% of their eligible amount in cash up front to Argentina to get 10-year bonds with a 7%-8% coupon. Some $2.5bn in cash is expected to be used by the sovereign in the exchange. “[Retail] bought at the nominal value, so of course for them it is really unattractive,” says Stock. The official says he has not yet been approached by the sovereign or its bankers – Barclays, Deutsche and Citi. According to Stock, the Italian retail claim including PDI is worth more than $6.5bn. The official says hedge funds that bought in the 20s would very likely take the new deal, since they would make a substantial profit. He alleges that some of the banks involved in the swap also have exposure. “They are also very happy to do it, and taking positions,” says Stock. The Italians are pursuing their claim through ICSID, where the group seeks full payment of principal and PDI. Stock anticipates news on that in 2009. Creditors’ main gripe is that the sovereign shunned real negotiations. “We are going further in this battle against Argentina. We never had a chance to talk seriously with them,” Stock adds. Argentine officials say that the holdouts offer is still being analyzed and they decline to provide specific details. The final transaction could end up with differen