Argentina Restructuring Woes Set to Linger

Argentina is keen to put debt problems behind it and get back to issuing bonds, but its latest plan to retire holdout debt is seen taking months and achieving only partial success. According to news reports, economy minister Boudou expects to close the transaction in 45 days. “We think that it will be very difficult to close the transaction so quickly; instead, we expect the bond swap to settle sometime in Q1 2010,” says Credit Suisse. According to the shop, if participation in the new deal is at least 60%, this would imply that 90% of bond debt defaulted in 2001 has been restructured, thus aiding the government with remaining lawsuits by holdouts. However, lack of retail participation could hobble the deal, and any remaining holdouts may potentially attach coupon payments on a new international issue. “The risk here is that under pressure by the most senior policy makers (the Kirchner couple and some key advisers), minister Boudou has to present another aggressive proposal; in which case the re-offer might not be the final solution to the problem of the defaulted debt,” says Goldman Sachs. “This would complicate not only the possibility of returning to international capital markets but might also have negative implications for restructuring the arrears to the Paris Club and to build a more constructive relationship with the IMF,” it adds. In Boudou’s announcement last week, there was reportedly no mention of PDI or GDP warrants. “Our expectation is that the government will issue a bond in the middle part of the curve to compensate bondholders for the interest accrued and for the past payments on the GDP warrants,” says Credit Suisse. The shop estimates the value of the USD untendered debt in the 40-50 range, with 45 a base-case valuation. “The value of the EUR-only exchange is 33-42 range,” Credit Suisse adds.