Argentina's debt restructuring proposal took a step forward after it received a green light from the US Securities and Exchange Commission. The debt deal is now likely to offer bond holders 31 cents or 32 cents on the dollar, up from the 24 or 25 cents previously offered by authorities in Buenos Aires in their restructuring guidelines issued in June, says Walter Molano, head of research for BCP Securities in Connecticut.
The SEC's approval of the shelf-registration documents in which Argentina presents its restructuring guidelines clears the way for a final settlement. The SEC's decision will allow the government to file a prospectus describing the bonds it would issue in an exchange for some $100 billion in defaulted debt.
The depth of the haircut anticipated on Argentina's defaulted bonds has been gradually improving due to market conditions and the SEC move was widely expected by the market. "The market [for emerging markets debt] has rallied so exit yields are likely to be meaningfully lower than in June, which brings the value of the June offer up with no effort on Argentina's part," says Jim Barrineau, senior vice president for global economic research at Alliance Capital, an investor in emerging market bonds.
Market movement made the value of Argentine bonds rise from 26 cents to 29 cents on the dollar before the SEC decision, he adds. "It doesn't take a lot of effort from here to bring more [improvement]."
Argentine President Nestor Kirchner lashed out again Wednesday at international financial pressures, denouncing the leadership of the Washington multilaterals. "Argentina tries to [hold a] debate to make a response to its great issues, and every now and again we meet with leaders of international organizations that, as if they were ranch-hand bosses, tell us what we must do in the country," Kirchner said at a meeting related to a literacy campaign.
His remarks came on the same day that IMF Managing Director Rodrigo Rato called on Argentina to normalize its relations with international markets. The president's words played well at home and enhances the image of Kirchner as an independent player, market analysts say.
The timetable for Argentine debt negotiations is made clearer by the SEC approval. The SEC is expected to approve an updated registration statement by next week. Then, within three weeks, it is likely to approve a prospectus that describes the new bonds that would be exchanged for defaulted bonds. A roadshow and launch of the debt swap are expected in November, according to Goldman Sachs Economic Research.