Thursday, March 17, 2016

Suitors line up as gov’t readies bonds sale

IMF chief Christine is pictures during a meeting in Vietnam yesterday.

Banks, IMF, individual investors could all be sources of fresh funds after holdouts deal

Argentina’s potential creditors are growing by the minute, with the fast-approaching holdouts deal in Congress set to open the country up to global investors eager to snap up bonds which would pay rates far above what most other sovereigns offer.

Some of the top global banks, the IMF, hedge funds and individual bond investors are all being targeted by the government as potential sources of financing, with some of those deals close to being sealed and others rapidly moving forward.

“There is a very important apetite for Argentine financial assets because the rest of the world is seeing that interest rates are going down and those who don’t seal a deal now will not find similar opportunities in the coming years,” Puente investment bank’s chairman Federico Tomasevich said yesterday.

His words came hours after reports emerged saying the economic cabinet has informally agreed with top international banks such as JP Morgan, HSBC and Deutsche Bank to a series of loans worth at least US$12 billion in order to obtain the cash needed to pay Paul Singer and other “holdout” creditors who sued the country in New York courts and end the conflict that has been troubling Argentina’s access to international markets for years.

According to Ámbito Financiero, the cash facilitated by the banks could grow up to US$15 billion, opening the door for funds that not only help cover the bill for the “vultures” deal but also to finance part of the country’s fiscal deficit.

Yet that is far from the only potential source of financing.

According to Tomasevich, Venezuela is the only Latin American country which offers better rates than Argentina, and that means there is likely to be a “brutal oversubscription” of investors looking for Argentine bonds if the country offers rates of 7.5 percent, which grant returns that are hard to come across elsewhere.

Argentina is seen as likely to replace Brazil as a continental darling for investors, as the neighbouring Mercosur partner struggles with recession and troubled public finances.

Locally, meanwhile, the deal with holdouts, the end of the “clamp” on the foreign currency and a gradual reduction of the fiscal deficit are seen as capable of luring capital.

Tomasevich said that a fiscal surplus wasn’t even necessay for the country to obtain good offers.

IMF inspections

The government is also eager to have the International Monetary Fund (IMF) audit its books again, a move that could open the door for new loans there too.

Reports yesterday said the Finance Ministry wanted to start complying with the IMF’s Article IV this year.

Under Article IV of the IMF’s statutes, members face regular inspections in which officials from the Washington-based fund speak to lawmakers, business leaders and unions to make recommendations about the country’s economic outlook.

The country has not had such audits since the Kirchnerite government paid all its debts to the fund and refused to continue those inspections, following a traumatic clash between Argentina and the institution in 2001 which helped unleash that year’s financial crash and debt default.

Earlier this year, Finance Minister Alfonso Prat Gay had said during his visit to the World Economic Forum in Davos, Switzerland, that “we want (to be subject to) Article IV because we have nothing to hide.”

With those audits back in place, the IMF could become another potential source of credit soon, although that is likely to spark political controversy due to the country’s troubled history with the organization.

The government, meanwhile, is also considering an amnesty on capital flight to attract more direct investment.

Interest rates

Prat-Gay is said to be looking for interest rates below eight percent.

Analysts consulted by the Herald say rates between seven and eight percent are achievable for the country, and that they could even drop below that in the coming months after the first debt issues.

Those figures are still high for the region.

Colombia yesterday sold 1.3 billion euros worth of bonds at a 3.9 percent interest rate, to be repaid in 10 years, closer to what most countries in Latin America are paying. None of them, of course, have struggled with a debt conflict and default as big as Argentina in the past decades.

Herald with online media