Monday, April 18, 2016

More than US$65bn in orders for Argentina's first international bond in 15 years

Argentina got an enthusiastic welcome back to the club of borrower nations on Monday, amassing more than US$65bn in orders for its first international bond in 15 years.

A market pariah since defaulting on its debt in 2001, the country clearly won over investors with an up to US$15bn bond whose proceeds will help pay its long-complaining creditors.

The surge of demand for the bond, which will price on Tuesday, allowed Argentina to set pricing guidance close to its optimistic funding costs for the ground-breaking deal.

Litigant bondholders who rejected the terms of Argentina's debt restructuring and filed suit for a better payoff will have first dibs on the proceeds of the transaction.

The holdouts, led by US hedge funds Elliott Management and Aurelius Capital, will get about 75% of what they had claimed under the agreement.

Meanwhile Argentina gets to draw a line under the messy litigation and re-open the capital taps to help fund his ambitious overhaul of Latin America's third-largest economy.

The sovereign was able to tighten pricing significantly across most of the four-tranche bond on the back of the order book, one of the largest ever seen for an emerging markets bond.

It set guidance of 7.5%-7.625% on the 10-year tranche - the centerpiece of the offering - in from initial price thoughts of 8% area that were given to investors.

The yield on the 30-year tightened at guidance to 8% from initial thoughts of 85bp over the 10-year's yield.

At the short end of the curve, guidance on the three-year was set at 6.25%-6.50% and on the five-year at 6.875%-7.125%.

Deutsche Bank, HSBC, JP Morgan and Santander are acting as global coordinators on the bond sale, while BBVA, Citigroup and UBS are joint bookrunners.