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Argentina to issue $15-bln bonds, returns to credit markets

March 3
2:47 AM 2016

Argentina is in the process of issuing the $15-bilion bonds, the largest sum by any developing nation since 1996. Argentina's new President Mauricio Macri has decided to use funds mobilized through bonds for repaying debts and supporting government spending.

Ending a 13-year legal dispute, Argentina just reached an agreement with hedge fund billionaire Paul Singer. After the 15-year long market turmoil, Argentina is poised to attract overseas investors. Market analysts are uncertain on who would invest in a country, which has been guilty of several defaults over the centuries. The new President of Argentina Mauricio Macri has agreed to pay $4.65 billion cash payment to four holdout creditors including Singer.

Financial Times reports that the agreed payout to four holdout creditors would be funded through bond issue. Argentina's government is about to issue $15 billion new bonds to mobilize funds to repay debts. Argentine Finance Minister Alfonso Prat-Gay is keen on utilizing the funds from bonds issue to fund government spending and improve reserves. 

With the proposed $15-bln bonds issue, Argentina has emerged as largest issues of hard currency bonds among emerging markets. Earlier, Mexico mobilized $20 billion 20 years ago, according to Dealogic, a global data provider. Argentina's government needs to get approval from Congress before any debt is issued. 

After its infamous $95-billion default in 2001, Argentina is making a return to global credit markets. New President Macri-led government needs to repeal existing laws made by former President Cristina Fernandez to pass the deal. Chamber of Congress has to okay the bill by 16th of April 2016. Argentina badly needs foreign investment to repay debts and support the government funding schemes to give a push to the ailing economy, as reported by CNBC.

Macri's government doesn't have full majority in the Chamber of Congress. The debate on the proposed $15-bln bonds issues is scheduled in the Chamber of Congress. On the other side, the Argentine government has already commenced negotiations with international banks on arranging issuing of bonds. 

Argentina, South America's second largest economy, is gearing up to access global credit markets after a gap of 15 years. Paul Singer's Elliott and three other US hedge funds will get $4.65 billion cash payment. This is the largest settlement in the $6.2 billion resolutions made by Argentina during the past few weeks. The ruling by US District Judge Thomas Griesa has freed Argentina to repay holders of restructured bonds amounting over $3 billion in past-due interest, according to Bloomberg

Finance Secretary Luis Caputo last week said the first sale was expected in April.

The new President Macri is known for his business-friendly measures. He took charge as President in December 2015. Ever since Macri assumed charge, markets have started moving up and bonds have come out of crisis mode. Yield on Bonar 2024 bonds, new 10-year debt, rose to 7.9 percent. 

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