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Argentine Bonds Slide for Third Day Following Swap Announcement

Argentine bonds fell for a third day as the government’s decision to exclude past payments on warrants linked to economic growth from its $20 billion debt restructuring eroded demand for the country’s securities.

The yield on Argentina’s 7 percent bonds due 2015 rose four basis points, or 0.04 percentage point, to 11.41 percent at 5:20 p.m. New York time, according to Bloomberg pricing data. The bond’s price slid 0.1 cent to 82.85 cents on the dollar.

Bonds began sliding after Economy Minister Amado Boudou on April 15 unveiled the general terms of the country’s plan to restructure defaulted debt held out of a 2005 settlement.

“Today’s minor decline for bonds has to do with profit taking that started on Friday,” said Sabrina Corujo, an analyst with Portfolio Personal, an online brokerage in Buenos Aires.

Argentina will offer investors 33.7 cents on the dollar for securities due in 2033, warrants linked to gross domestic product, and pay past due interest with 8.75 percent bonds due in 2017, Boudou said last week. The government will also open the exchange to bondholders who participated in the 2005 settlement.

Italian regulator Consob is likely to delay until next week a decision on whether to approve Argentina’s offer after Argentina made changes to it last week, said a person familiar with the matter, who asked not to be identified because the review hasn’t been completed.

Cash Payment

Regulator backing in Italy, a country that is home to tens of thousands of individual investors who hold defaulted Argentine securities, is the final approval the country needs to start the restructuring offer, Boudou said yesterday in Buenos Aires.

Boudou’s announcement last week included changes from a swap document filed with the Consob last month. Among changes, Argentina is offering individual creditors a cash payment for past due interest instead of a bond, while the new 2017 bonds will only be dollar-denominated, said Siobhan Morden, a debt strategist with RBS Securities Inc. in Stamford, Connecticut. A penalty for larger-size creditors was changed so that it only affects investors who enter the exchange late, she said.

“People have focused on the exclusion of the past-due payments on the warrants, but there were a few sweeteners there,” Morden said.

The government believes a settlement with remaining creditors will help Argentina regain market access and credibility among investors nine years after the government defaulted on $95 billion of debt.

TFA, the group that represents some 180,000 Italian individuals holding Argentine defaulted bonds, said it will evaluate the exchange after the country’s market regulator Consob completes its review of the offer.

Argentina’s peso slid 0.2 percent to 3.8713 per U.S. dollar, from 3.8632 yesterday, according to Bloomberg prices.

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