TGN Restructuring Offer Displeases

Argentina’s TGN, which put forth a debt restructuring proposal earlier this week, is likely to be in for a substantial amount of negotiation on the terms of the deal, say investors and bankers away from the process. TGN, whose bonds are quoted trading in mid to low 20s, has offered investors the option to exchange some $347m in 2012 bonds for new 2021 notes paying 2%-6%, or to receive cash at a 75% discount to face value. An investor who claims to be holding a large position says the recovery is around 25%, depending on the exit yield, and wants to see at least another 10 points. “People are shocked at how draconian the proposal is,” says James Harper, director of corporate research at BCP Securities. “We expect push-back.” Harper, some of whose clients include large hedge funds and mutual funds that are holding TGN notes, claims investors were expecting something more palatable. For example, a 7-8 year bond with a coupon of 6%-8% and amortizations starting in the third or fourth year, would be more reasonable, he claims. “It would be well within the company’s ability to service a 7-year bond with a 7% coupon.” Barclays is advising TGN on the restructuring.