More than $65 billion in orders for Argentina's first international bond offer in 15 years.

[forest444]

Source: Buenos Aires Herald

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

An international bond market exile since defaulting on its debt in 2001, the country clearly won over investors with a nearly $15 billion bond offer four times oversubscribed. The surge in 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.

The proceeds will be divided between recent settlements with holdout bondholders ($8.5 billion) and local balance of payments deficit financing needs. Litigant bondholders who rejected the terms of Argentina's 2005-10 debt restructuring and filed suit for a better payoff will have first dibs on the proceeds of the transaction. These holdouts, led by Paul Singer's hedge fund Elliott Management (Cayman Islands) and Aurelius Capital (London), will get about 75% of what they had claimed under the agreement.

The $8 billion payout to holdouts (including $4.65 billion to four vulture funds, led by the two above) was touted by the Mauricio Macri administration as a way to put aside years of messy litigation and re-open the capital taps to help fund his ambitious overhaul of Latin America's third-largest economy.

The success of today's sovereign bond offer - the largest since Mexico's in 1996 - allowed Argentina to tighten pricing significantly across most of the four-tranche bond on the back of the order book. It set guidance of 7.5%-7.625% on the 10-year tranche - the centerpiece of the offering - from initial price thoughts of 8%. The yield on the 5 and 30-year bonds tightened at guidance as well.

Read more: http://buenosairesherald.com/article/212823/more-than-us$65bn-in-orders-for-argentinas-first-international-bond-in-15-years

---

While certainly good news for Argentina at first blush, it's a shame that more than half of these proceeds are going to holdout bondholders (mainly vulture funds) which when bonds are restructured typically aren't given the time of day by the courts anywhere.

In a broader sense this also heralds Argentina's return to the same vicious cycle of borrowing at high interest just to make interest payments - a risky policy indeed.

[whistler162]

1. David Hannum was right.....

"There's a sucker born every minute" fast forward to the next default and billions lost by investors and billions made by vulture capitalists.

[forest444]

2. With JP Morgan and HSBC as the issuing agents, something's indeed probably up.

Especially if, as I suspect, they've been buying CDS default insurance on these same bonds (as Paul Singer did with his).

And what the cheerleaders also neglect to mention is that the bondholders who didn't receive the exorbitant payout that Singer's getting (1,180%, according to Joe Stiglitz) may sue for repayment on equal terms at some point. That, more than anything else, could potentially push Argentina to default on these new bonds.

Fingers crossed.

[Judi Lynn]

3. It's a rotten shame. Ugly business. n/t

[forest444]

4. Indeed. $15 billion in extra debt, most of it pay vulture laundromats and other bad-faith holdouts.

I'm sure you wouldn't be surprised if I told you that HSBC (the preferred bank of Argentina's tax cheats - and elsewhere) and JP Morgan (Economy Minister Prat-Gay's former employer, if you remember) are the issuing agents. Hundreds of millions in fees, so I understand.

Plus, if they buy CDS default insurance on these bonds (which they probably are, just as Singer did with his), they can make money on them twice: once when they float, and then again when they sink.

Knock wood, I hope this turns out alright. The last thing they need is another vulture fund drama.