Argentine officials are quietly confident that their debt restructuring will prove a big enough hit to get the country back on track, as the process draws to a close later today.
While the government initially stated that it considered a 50% participation rate as a measure of success, many officials reckon that the figure will be at least 75% as investors trade their defaulted bonds for new debt.
"We see a high level of consensus," says Luis Corsiglia, president of local exchange agent Caja de Valores in an interview with Bloomberg. "Everyone is waiting to see what the others did before taking a final decision."
Although final figures will not be known for several days, Bank of New York has indicated that as of February 18, $41 billion of face value bonds had been tendered. Local officials say that a little over 90% of the local holdings have already been swapped, an amount that represents about one-third of the eligible debt.
In addition, some 12% of eligible holdings have been tendered by overseas investors, for an estimated total participation rate of about 45%, according to ABN Amro. The government, however, reckons many US and European institutional investors, entered this week leading to a significant increase in the final participation rate.
Many investors are tendering their defaulted debt, despite being unhappy about the terms of the final offer. The government has offered investors new bonds worth about 25 cents for each dollar (at face value) of defaulted debt.
"I'm not happy but you have to detach yourself from it [the process]," said Raphael Kassim, emerging markets fund manager at ABN Amro Asset Management, at a Euromoney conference earlier this week. "Fiscally Argentina is doing very well and it's likely that after the restructuring the bonds will continue to perform."
One concern is that retail investors will miss out during the last minute stampede. Many banks throughout Europe stopped accepting instructions from retail investors earlier this week, citing back office glitches. According to some estimates about $4 billion of defaulted debt could be left on the sidelines. The government, moreover, has stated that it will not re-open its offer.
Once the final figures have been counted, all eyes will turn to Washington to see if the IMF restarts its programme with the Latin nation. So far, many investors have interpreted the Fund's silence over the restructuring as tacit approval of Argentina's stance and expect the multilateral to renew negotiations as soon as possible, especially if a 75% participation rate is met.
However, Pier Paolo Padoan, Italy's executive director at the IMF, said that 75% participation should not be considered an official target or a benchmark beyond which an agreement between Argentina and the IMF can be secured. He said such a "magical number" does not exist.