Argentina's old bonds wave goodbye as focus turns to new debt

BUENOS AIRES/LONDON (Reuters) – Out with the old. In with the new.

Argentina’s old sovereign bonds took their final bow on Friday after a near $65 billion restructuring, with new instruments set to be issued and start trading in earnest next week, drawing a line under the country’s ninth default.

The bonds, including the notorious “century bond” maturing in 2117, came into the spotlight as Argentina buckled under economic crisis, leaving it unable to keep up with repayments and leading to a default in May.

After months of tense negotiations, the country’s center-left Peronist government reached a breakthrough accord with creditors at the start of August, which led to 99% of the eligible debt being restructured.

On Friday, Argentina also achieved close to 99% acceptance in an early restructuring of around $41.7 billion in local law bonds denominated in foreign currency, a Reuters calculation from a local securities regulator statement showed.

The country will issue 12 new international bonds that mature between 2029 and 2046, and should start trading from Monday, a holiday in the United States, meaning they would gain volume on Tuesday, traders said.

“Today when the new bonds are settled, the previous ones will disappear,” said Roberto Geretto, an economist at Banco CMF in Buenos Aires.

In gray market transactions, the new bonds were trading at around an 11% yield, analysts and traders said, giving some indication of where they could settle next week.

“The first operations of the new titles showed optimistic results, with yields close to 11% in the bonds of both legislations,” Argentine brokerage Portfolio Personal Inversiones (PPI) said in a note. “In any case, to get a true idea of these yields we will have to wait for more deals that will be given with the liquidations on the different exchanges.”

Viktor Szabo at Aberdeen Standard Investments in London said the new 2030 bonds had started trading on Thursday at 55 cents, or at around a 9.6% yield, though had closed lower at 51.5-52.2 cents, indicating a 10.6% yield.

Brokerage SBS said that in thin trading, foreign law dollar bonds traded at yields of around 10%-11%.

Another important step will be when the new bonds are added into JP Morgan’s widely tracked emerging market debt indexes, set for Thursday, which is expected to increase the country’s weighting in dollar-denominated indexes.

Argentina’s final proposal gave creditors an average net present value of 54.8 cents on the dollar. The country’s bonds have been on a wild ride since mid-2019, tumbling as low as 20-odd cents on the dollar before rising in recent months.

The government will now turn its attention to talks with the International Monetary Fund to negotiate a deal to replace its record $57-billion standby agreement struck in 2018.

Related Coverage

  • Argentina closes early restructuring of $41.715 billion local law bonds: stock exchange

A number of regional governments are also involved in smaller restructurings, including Buenos Aires Province, which is in talks to revamp around $7.148 billion in debt.

(GRAPHIC: ‘Old’ Argentina bond prices – here)

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