Argentina May Sell Up to $15 Billion in Debt to Pay Holdouts

  • Prat-Gay outlines plans contingent on congressional action
  • Sale would follow repeal of Lock Law, Sovereign Payment Law

Argentina may seek to sell as much as $15 billion in bonds to settle debt with creditors, Finance Minister Alfonso Prat-Gay told reporters Monday.

The country will issue international bonds to pay holdouts who reach an agreement with the nation by Feb. 29 soon after congress repeals laws that bar it from paying creditors, he said. The announcement follows a milestone decision by U.S. District Judge Thomas Griesa, who agreed Friday to lift injunctions barring Argentina from servicing debt or raising capital in international debt markets if conditions are met. The government expects to save $5 billion due to the terms of the deal it proposed to its creditors and an additional $3 billion from paying bondholders in cash rather than through a bond exchange, Prat-Gay added.

"We are studying the details of the proposal we will send to congress," Prat-Gay said at the Finance Ministry alongside Finance Secretary Luis Caputo. "Much will depend on how many funds join the proposal next week. We’re planning to do things in such a way that we only have to go to congress once on this matter."

Argentine securities fell after the announcement, with Bonar 2024 bonds issued under local legislation, losing 1.14 cent to 107.05 cents on the dollar, at 12:30 p.m. in New York. That’s the lowest price since Feb. 11. Yields rose 0.19 percentage point to 8 percent.

“Weakness in Bonar 24s is a result of the debt case moving faster than expected, an  eventual preference for NY law debt at current relative yields and the fear of a supply glut in local law debt,” Jane Brauer, a strategist at Bank of America Corp., said by e-mail.

There is no date set yet for congress to discuss the repealing of the so-called Lock Law and the Sovereign Payment Law, which bar the country from reopening the 2005 and 2010 restructurings and which mandate the country make bond payments through local channels, Prat-Gay said. Repealing the laws are among the U.S. judge’s requirements to lift the injunction. Argentina’s congress, currently in recess, reconvenes March 1.

Debt mediator Daniel Pollack also sent a statement Monday noting that five new funds agreed to settle with Argentina for a total of $250 million and 185 million euros. Argentina has already agreed to pay more than $1 billion to settle with billionaire Kenneth Dart’s EM Ltd. and Montreux Partners in addition to deals with holders of euro-denominated debt and 50,000 Italian bondholders. The agreements are part of a strategy by newly elected President Mauricio Macri to fulfill a pledge to reach deals that allow South America’s second-largest economy to return to global capital markets.

"All the banks we’ve spoken with are confident that we can raise the money we need in the market," Caputo said. "We’re optimistic."

Argentina is considering all jurisdictions and options for the new issuance, Prat-Gay said, without specifying whether the bonds would be issued under local or foreign jurisdiction. The country has been isolated from international markets since its $95 billion default in 2001.

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