Argentina delays debt swap launch to Jan. 17

November 24, 2004

Buenos Aires: Argentina on Wednesday said it will put off launching its record $102.6 billion debt restructuring from next week until Jan. 17 due to delays abroad in approving the debt swap proposal.

“The government announces that January 17 is the date for the global swap, unifying the national and international processes,” Economy Ministry spokesman Armando Torres told reporters late on Wednesday.

Creditors will have until Feb. 25 to trade in their old debt for up to $41.8 billion in new bonds, the government said in a statement.

Argentina had been planning to open the swap in Buenos Aires on Monday, regardless of whether regulators in other countries had approved its debt prospectus by then.

But since new bonds such as the par bonds were aimed at smaller retail investors on a first-come, first-served basis, the government said that maintaining the distinct dates could have brought legal complications.

Demand for the par bonds is expected to be especially high among Italian retail investors, a group often referred to as a “swing vote” that could greatly affect acceptance levels.

Argentina said last week that Italian regulators had informed them they would not approve the debt offer before the second half of December.

The Bank of New York, acting as the global exchange agent for the swap, told Argentina last week that the Monday launch was not feasible. And the government is now looking for a new clearing agent, which could take weeks.

A source close to the restructuring process said it would have been practically impossible to launch the operation on Monday in the United States as previously planned.

Wednesday’s decision was mulled over by Economy Minister Roberto Lavagna and President Nestor Kirchner himself, a government source told reporters earlier in the day.

Many creditors angrily reject Argentina’s debt restructure proposal as representing a record 70 percent debt write-off. Argentine officials have repeatedly said they will not sweeten the deal.

Wall Street said a solo swap in Argentina would have been foolhardy.

“The whole thing that you want with a deal like this is to generate momentum and do it all at once,” said Lacey Gallagher, director for Latin American economics for Credit Suisse First Boston.

“If they did that, one would have to adjust slightly one’s odds for the eventual success of the deal,” she added.

The bid price on Argentina’s defaulted bond due to mature in 2008, widely seen as an indicator of how much the market expects to get back on every dollar of bad debt in the swap, stood flat at 31.250 in Wednesday trading.

Analysts have said that delaying the launch for too long could affect acceptance levels because rising U.S. interest rates will make emerging market bonds generally less attractive.

“As this deal gets delayed into early 2005 you are running the risk of trying to accomplish the deal in an environment of rising international interest rates and presumably increasing risk aversion,” said Thomas Trebat, Managing Director for Economic and Market Analysis for Citigroup. (Additional reporting by Greg Brosnan in New York)

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