Momentum was building this weekend towards Argentina
reopening its exchange with holders of up to $15 billion worth
of defaulted sovereign bonds.
Financiers in Cancun said a deal is closer than at any time
in the last five years.
The deal is ready to get done, Miguel Kiguel of
Econviews consultancy, and a former Argentine finance
secretary, said. Kiguel reckoned that an agreement may be ready
to go after Easter with a good level of
Market sources believe Argentina is close to winning
acceptance for a deal among bond holdouts (investors who
rejected a previous deal).
Edwin Gutierrez, portfolio manager at Aberdeen Asset
Management, predicted a percentage acceptance level in
the low 90s. The value of the offer, yet undisclosed,
would have to be in the high 40s [% of the nominal value
of the bonds] to clear, Gutierrez told Emerging
Markets. There has to be some upside. Otherwise
its a non starter.
Argentinas economy minister Amado Boudou and finance
secretary Hernan Lorenzino are in Cancun for further talks with
investors on the fringe of the IDB governors
They arrived after Argentine authorities had on Thursday
amended an earlier filing at New Yorks Security Exchange
Commission, to allow the transaction to proceed. Both
government officials have declared their intention to proceed
with the deal at the beginning of April.
Even those who were originally skeptical have warmed to the
idea of a deal during the past week. Observers in Argentina say
the real motive lies in a slight improvement in the domestic
political climate, following weeks of open conflict that
created a sense of institutional weakness and threatened to
spark another serious crisis.
The controversy flared up after the decision to transfer
$6.5 billion from central bank reserves to the treasury, which
prompted fears that the government may be running out of cash
or preparing to increase public spending ahead of next
There is a sense among politicians that the government
will not default, and in some situations, Congress will
eventually authorize the use of reserves, Kiguel said.
There is a big political struggle to determine who makes
the decision in Argentina. But no one is actually ready to come
out officially [publicly] to block such a
Gutierrez added that resistance among bond holders has been
diminishing as there has been a significant transfer of
bond holdouts from retail investors to institutional investors.
If the value of the offer is good, most would prefer to get the
money and go out of illiquid bonds.
Kenneth Levine, a Wall Street lawyer with Carter Ledyard
& Milburn LLP, said: Argentina was forced by the
system to honour its obligation.
A deal would only be a step towards the return to global
financial markets, as Argentina has yet to normalize relations
with the Paris Club of creditors and the IMF, which are still
fragile due to the unorthodox economic policy pursued by
president Cristina Fernandez de Kirchner.