Argentina’s new 2017 bonds sank in their first day of trading as the government began turning over the securities to investors as part of its restructuring of defaulted debt.
The 8.75 percent notes tumbled to 80.85 cents on the dollar from their issue price of 90.11 cents, Stone Harbor Investment Partners said. Argentina began issuing $738 million of the bonds today to institutional investors who participated in an early tender period. The government is distributing the securities as compensation for past due interest as it seeks to restructure $18.3 billion of defaulted debt kept out of a 2005 settlement.
“Argentina came up with an issuance price which isn’t really in line with reality,” said Jim Craige, who helps manage $12 billion of emerging-market debt, including defaulted Argentine bonds, at Stone Harbor in New York. The firm tendered some of its defaulted bonds after selling off most of its holdings in the run-up to the swap, he said.
Argentina is handing over the new securities after Economy Minister Amado Boudou said May 31 the government will extend the swap by two weeks to June 22 in a bid to attract more participants. He said yesterday that creditors holding about $9.1 billion of eligible debt, or 50 percent, had taken part in the swap, below the government’s target of 60 percent participation.
Postponed Bond Sale
A successful restructuring will allow Argentina to regain access to international credit markets for the first time since its record 2001 default on $95 billion in bonds.
The government postponed its original plan to sell up to $1 billion of the 2017 bonds as part of the exchange after the European debt crisis drove up yields.
The restructuring offer also includes 8.28 percent dollar bonds due in 2033 and warrants linked to gross domestic product.
The yield on Argentina’s 8.28 percent bonds due in 2033 declined 26 basis points, or 0.26 percentage point, to 12.86 percent at 4:07 p.m. in New York, according to Bloomberg data. The price of the bonds rose 1.38 cents to 65.69 cents on the dollar.
Argentina’s peso rose 0.2 percent to 3.9226 per dollar.
Editor: Lester Pimentel