La Nacion The government delays the opening of the third debt swap for bondholders still in default

La Nacion

The government delays the opening of the third debt swap for bondholders still in default

 

Saturday, October 5, 2013

 

by Martín Kanenguiser | LA NACION

 

Announced 40 days ago as a sign of good will to the courts of the United States, the third debt swap for bondholders in default is being delayed from starting.

 

While President Cristina Kirchner said on August 26 by national broadcast that she would put the new reopening into operation and that on the 23^rd of last month the law was promulgated which suspended the “lock law” (applied in the swaps of 2005 and 2010 to bring in more creditors) there is still no concrete date for this operation. 

 

"It’s being well worked on, but there is nothing in the immediate term.  The technical teams are moving forward,” said a source to LA NACION from the Palacio de Hacienda, without giving more details.  The spokesman said that the timing has nothing to do with the resolution of the pari passu case that, according to the consensus of the attorneys, the U.S. Supreme Court will not accept taking it the day after tomorrow, awaiting the other part of the case to go through the Court of Appeals in New York.  Yesterday, the President again criticized Judge Thomas Griesa, who prohibited the country from an eventual change of place of payment on the bonds.  “The United States judiciary is trying to leave us in default,” she complained.

 

Beyond the words, the government still has to filed the Form “18K” before the Securities and Exchange Commission of New York to launch te swap (and also has to follow the process in Buenos Aires) and, as a trade said, “by not having organizing banks that earn commissions, everything will take a bit longer.”  The most interested in having it start as soon as possible, of course, are the investment funds like Gramercy, Fintech and Fidelity, who bought bonds in default and that will help the percentage of acceptance by private creditors to go from 93 to 95%, according to the majority of analysts consulted by LA NACION.

 

"The attorneys from Cleary don’t want to take one false step in the middle of such a complicated judicial stage as this,” explained a private sector source around the internal criticisms the law firm that has defended the country since the 1990s is receiving.

 

In terms of participation, the chief for strategy at Bulltick, Alberto Bernal, argued that “something will have to come in and it remains to be seen if 95% of the bondholders is achieved,” while former secretaries of Finance Daniel Marx and Lisandro Barry said that, in terms of nominal value, between US$1.2 billion and US$1.6 billion will come in.  That way, some 5% will stay out, which will impened the definitive end of the default.  “It will be a marginal participation,” said the chief of Strategy for Puente, Alejo Costa.

 

This perspective not very optimistic regarding the swap has very clear manifestations.

 

For example, the rise in sovereign bonds since the primary elections in August and came when it became clear that the decision of the U.S. case will take another year, unless there is an extremely negative decision from the Supreme Court of that country, without even consulting the Obama government.  From the negative side, the brusk deterioration in the international reserves since January has played a key role, despute the continuation of the dollar clamp.  Another risk facto is the potential drop in the price of soy.

 

Costa said that the rebound is due “to the better news registered on the New York case and a lesser uncertaintly around the course up to 2015, because there is a clear common discourse of the possible candidates in the sense that the next government will focus on resolving the investment problem.”  Bernal added that “if Cristina loses in October, bonds could rise a bit more.” 

 

In tune with this, Credit Suisse analyst Daniel Chodos said that if the leader of the provincial Renewal Front, Sergio Massa, maintains or widens his lead over the government line, “this will be seen by the market as something positive and we can see some increases in Argentine bond prices.”  In particular, he said that “bonds with Argentine legislation will have to rise more than those with foreign law, but they don’t have much space to do so, because they are quoting at very high prices, like the Boden 15, around 94 dollars.” 

 

To the previous factors, according to a report from Elypsis, "one has to add a supposed payment offer (with a haircut, through the Baade?) to the litigants in the ICSID and INCITRAL, and to the progress with the new inflation index in line with a demand from the IMF (a necessary condition for agreeing with the Paris Club).”  But as they are repeated ideas, the consulting firm of Eduardo Levy Yeyati said not to celebrate things before they come together.