“With a restructuring you have a potential rise of 30% to 40% and even more if the courts really continue ruling against Argentina and it has to pay the plaintiffs in full,”

El Cronista

Argentine bonds in default already doubled in price since Griesa’s ruling

A restructuring on the same terms as the swaps of 2005 and 2010 would mean a potential rise of 30-40% in relation to current prices of warrants

 

Wednesday, January 16, 2013

 

Argentina’s bonds in default are negotiating at maximum levels of more than a year thanks to the expectation that the ruling from Thomas Griesa placed among holdouts that are suing Argentina today.  The investors that have battled in US courts for more than a decade are speculating on an eventual debt swap in which the government would offer some 30% more than the current value of unpaid warrants.

 

According to the Bloomberg news agency, the bonds in default have doubled in price to around 42 cents on the dollar since the U.S. appeals court ruled on October 26 against Argentina.  The betting by the market is that sooner or later the country will have to pay the creditors that rejected the swaps of 2005 and 2010, led by multimillionaire Paul Singer.

 

“The investors that are buying debt in default are prepared to receive more benefits and face few risks in losing their money,” according to Exotix Ltd., which specializes in bonds with little liquidity and in default.

 

Even if the court, which meets again on February 27, annuls a previous decision that requires Argentina to pay the holdouts the full US$1.3 billion that they are seeking, a restructuring on the same terms as in the swaps held in 2005 and 2010 would have a value of 54 cents on the dollar for bonds in dollars, according to Exotix.

 

“With a restructuring you have a potential rise of 30% to 40% and even more if the courts really continue ruling against Argentina and it has to pay the plaintiffs in full,” said Stuart Culverhouse, economist for Exotix, in a telephone interview from London with Bloomberg.

 

The unpaid bonds from Argentina in euros also rose to 40 cents from some 25 cents on the dollar at the start of December, according to Exotix.  Holders of Eurobonds also will be allowed to participate in a new offer that would have a value of some 47 cents on the dollar, with a base in current value of the warrants that would be received in the exchange.

 

On February 27, a hearing begins in the Court of Appeals.  Argentina will challenge the ruling of last November from Judge Thomas Griesa that obliged payment of principal and interest on the bonds in default.

 

“The holders of unpaid debt cannot count on Argentina complying will the sentence of the appeals court if it upholds Griesa’s order,” said Alberto Bernal León, head of research for fixed rate investments at Bulltick Capital Markets.