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Argentina’s Debt Sale Spurs Excitement and More Lawsuits

Argentina is expected to sell upto $15 billion,since it failed to pay interest on $100 billion in sovereign debt.

Updated
World
2 min read
Argentina has failed to pay interest on some $100 billion in sovereign debt. (Photo: iStockPhoto/Altered by The Quint)

Argentina’s long-anticipated return to the bond market after more than a decade as a pariah in international capital markets has brought forth eager investors - and somewhat unsurprisingly, more lawsuits from jilted creditors.

Some fund managers say they are excited to take advantage of Argentina’s first international bond issuance, where the country is expected to sell up to $15 billion, since it failed to pay interest on some $100 billion in sovereign debt.

Officials in Argentina, too, are eager to put 14 years of legal battles stemming from the 2002 default behind them after a February agreement with the biggest holdout creditors.

But even as those issues have been resolved, smaller lawsuits have cropped up. A suit filed last week by Greylock Capital Management, a well-known emerging market investor saying Argentina is still not treating investors equally. Greylock did not comment further.

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Since the election of President Mauricio Macri in November, Argentina moved swiftly to settle the debt dispute. It is mainly with US-based hedge funds Elliott Management and Aurelius Capital that sued in federal court for full payment on sovereign bonds defaulted upon in early 2002.

Brett Diment, head of global emerging market debt at Aberdeen Asset Management PLC in London, noted that his firm has a position in the bonds that Argentina was not paying interest on.

The new government has reached an agreement with the plaintiffs and to pay those plaintiffs Argentina needs to issue bonds. We were excited and positive because it means Argentina will go current on the securities that we own.
Brett Diment, Head, Global Emerging Market Debt, Aberdeen Asset Management

Two teams of Argentine officials are meeting investors in New York, London, Los Angeles, Boston and Washington this week seeking prices on 5, 10 and 30 year debt.

Preliminary reports indicate the interest rate Argentina might offer on the new bonds is in the 7.5 percent to 8.5 percent range. Investors have said the debt sale presents a unique opportunity for an improving credit story in emerging markets. Although some have said they would need to see yields of at least 8 percent and possibly as high as 9 percent to pique substantial interest.

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