Citigroup Warns of Restructuring on Local Debt: Argentina Credit
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Argentina’s plummeting foreign reserves are a sign to Citigroup Inc. that the least-creditworthy borrower in emerging markets may decide to impose losses on bondholders of $5.8 billion of debt.
Dollar-denominated bonds due in 2015 and sold under Argentine legislation have risen to a 17-month high of 95.39 cents as investors switched from notes governed by New York law on speculation the local debt will be insulated from holdout creditors suing in U.S. courts. Citigroup says bondholders, which include AllianceBernstein LP and MFS Investment Management, are underestimating the risk of losses after reserves that are used for debt payments fell at the fastest pace in more than a decade to a six-year low of $37 billion.