LatinFinance - January/February 2013 - 28

Argentina sovereign debt

two years before we issue a new 10-year
bond,” García Moreno says. “At the end
of the five years we will have a well
defined yield curve, and where the bonds
outstanding will be $2 billion to $3
billion-equivalent in size.”
In the end, García Moreno says about
35% of the deal was allocated to LatAm
investors with US buyers accounting for
56% and Europeans 9%.
A bookbuilding process like that
used on a 144a sale would give it
control over who got the bonds, rated
AAA on a national scale and A2/A/Ainternationally. The balance between
local and international accounts as well as
between buy-and-hold buyers and others
was the key to make the transaction

achieve its objectives.
The six banks chosen for the
November sale – HSBC, Deutsche Bank,
Morgan Stanley, BBVA, Citi and Credit
Suisse – will handle future issues,
rotating between active and passive
roles.
García Moreno says that, despite
its novelty, the project received
strong support from Mexico’s banking
commission. Bankers see Pemex as
the next candidate to use this format.
Large infrastructure projects are also a
possibility, García Moreno says.
“There are other entities in Mexico
that could use this instrument,” he
says. “It may be the case that the future
funding is mainly in pesos.” LF

©REUTERS

fell in December, as holders of the
restructured debt contemplated a worstcase scenario of a par-for-par exchange
into local debt.
Although judge Griesa and other
involved parties insist Argentina is a

special case, others – most particularly
Ecuador – have holdouts, so there are
potentially wider implications of these
rulings.
However, the implications for other
restructurings may be limited, says
the ratings agency Moody’s, as not all
sovereign bond contracts have the same
formulation of the pari passu clause as
Argentina.
The vast majority of foreign-law
sovereign bond contracts contain
collective action clauses, which set a
lower threshold for the completion of
a successful debt exchange. Thus, the
agency reckons that pari passu clause
risk is more applicable to New York law
bonds issued before 2003, which contain
pari passu clauses but no collective
actions.
“Once you look past president
Cristina Kirchner’s rhetoric and the
government’s mismanagement of
the economy, they have a very strong
incentive to figure this out even in the
worst-case legal scenario,” says Jim
Barrineau, co-head of emerging market
debt at Schroders, speaking at the EMTA
event in December. “We own some bonds
and we don’t think they are going to
default.” LF

Moment of truth: Argentina awaits
favor. For many, this represented an
opportunity to buy in November and
December, though at what level was
not readily clear. Argentina is not
looking for a haircut after all, only to
circumvent the holdouts. Bond prices

The Big Sell continued from page 24
García Moreno says. “This is the first
time I know of that we have had this kind
of seamless offering that goes to both
markets without any distractions in terms
of who can buy or who can play in them.”
The idea is to reopen the bonds
frequently – ideally once a quarter – and
build up a benchmark bond in a local
currency which had never had such
liquidity. It should give investors greater
diversity.
The telecom’s plan is to stick to
10-year bonds for the moment, as this
is where there is the best overlap for
demand from locals and internationals.
A 100 billion peso program registered in
July is good for five years.
“We intend to tap this for 1.5 to

28 LatinFinance

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January/February 2013

1/9/13 12:22 PM
LatinFinance - January/February 2013

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