Third Point Renews Argentina Bet Seeing Exit from Malaise
Dan Loeb’s Third Point LLC renewed a bet on Argentine government debt, wagering the country will reach a deal with creditors to resolve claims from its 2001 default by the end of the year.
Third Point, which has about $14 billion in assets, also took a stake in Argentina’s state-controlled oil company YPF SA (YPF), the New York-based hedge fund said in a second-quarter letter to investors, a copy of which was obtained by Bloomberg News. Loeb’s firm said it “re-entered” the credit investment after a sell-off in January.
“We are in the midst of a critical inflection period for the country: if the government settles with its hold-out creditors, Argentina will regain access to global capital markets,” Third Point wrote in the letter. “We hope to uncover additional investment opportunities in Argentina as it emerges from its long malaise.”
More than a decade after its record $95 billion default, the South American country is seeking to resolve the legal battle with holdout creditors including hedge fund Elliott Management Corp. that have won a court order requiring the nation to compensate them in full when it makes payments on the bonds it has restructured. President Cristina Fernandez de Kirchner, who has repeatedly referred to defaulted creditors as “vultures” she would never repay, is coming to the negotiating table in a bid to avoid a second default in 13 years.
Third Point joins Fortress Investment Group LLC principal Michael Novogratz in seeing better prospects for Argentina’s assets. Investors should bet on the country’s stocks, bonds and currencies, Novogratz said earlier this week at the CNBC Institutional Investor Delivering Alpha conference in New York.
Argentina’s economy contracted for the first time in two years in the first quarter as the government devalued the currency 19 percent and raised interest rates. Third Point wrote that an impending change in leadership at the end of 2015 should also produce more market-friendly policies.
The investment firm, founded by Loeb in 1995, said that its gains this year have been led by corporate and structured credit. Third Point Offshore Fund Ltd. rose 1.9 percent in June and 6 percent this year, according to a performance update to investors,
Relatively small investments in Latin America have been exceptional performers. In June, Third Point participated in a $2.2 billion capital raise for Fibra Uno Administracion SA (FBASF), Mexico’s largest real estate investment trust, wagering that economic growth should result in rising rent levels for retail, office and warehouse properties.
Japan has been the biggest source of losses this year, according to the letter, as stocks slumped in the first quarter. The firm is still finding opportunities in the country and expects macro conditions that have been “headwinds” to become more favorable toward the end of the year.
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