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Argentina to push $12.5bln bond offer in US, UK

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(Credit: Diego Levy/Bloomberg via Getty Images) Mauricio Macri, Argentina's president, speaks during a news conference in Buenos Aires, Argentina, on Thursday, April 7, 2016. Macri said he has nothing to hide and has told the truth about allegations that he's been on board of shell companies registered in Panama as mentioned in so-called Panama Papers investigation. Argentina President Mauricio Macri Holds News Conference
April 8
10:03 PM 2016

The Argentina government is planning to promote its $12.5-billion bond offer in North America. Towards this, the government officials will participate in road shows in New York, Washington and Los Angeles. The country has chalked out a strategy to promote the bond offer in the global debt markets. The $12.5-bln bond offer will be marketed in the US and the UK.

Luis Caputo, Finance Secretary of the Argentina government, is leading a team of officials in promoting $12.5 billion bond issues in the US. Organizing road shows in major global cities is one of the measures to market the $12.5 billion bonds. The country is raising money for the first time since the nation had a default in 2011. 

Nasdaq says Argentina will use mobilized funds to payback holders of defaulted debt. Argentina is facing legal tussle over defaulted debt for long. Morgan Stanley has estimated that Argentina needs to mobilize $20 billion in external debt in 2016. It'll be the largest emerging market sovereign bond issue in 2016. Some analysts are skeptical that South American nation may find it difficult to tap potential buyers. 

Market analysts forecast rise in Argentina's bond ratings over a period of time. Series of defaults by Argentina has resulted in lower ratings on the country. Considering the current situation in global markets and default record of Argentina, finding enough buyers seems to be not that easy.

Investors balked at 7.5 percent yield that Argentina so far floated on 10-year notes. This yield is similar to Petro leos Mexicano's issuance in January. 

Argentina President Mauricio Macri in February reached an agreement with US hedge funds led by Elliott Management Corp. This deal has enabled the Argentina government to tap international debt markets. As part of the settlement, Argentina government would pay $4.65 billion to creditors by April 14, 2016. However, some officials expressed their doubts that the government may not be able to honor this commitment. The delay may further complicate or delay the issuance of new debt, as reported by Fidelity.

Bianca Taylor, a senior sovereign analyst covering Latin America for Loomis Sayles & Co, which has $16 billion in emerging-market assets firm wide, said "My only concern is price. We think 7.5 percent is not enough yield for someone who is coming to market with what looks like it could be the largest sovereign-bond issuance in history."

Reuters further adds that the Argentine Senate has approved a deal to repay creditors holding defaulted debt. If Argentina government repays debt by deadline, it'll end the 14-year legal battle over default. Argentina's economy is suffering from high inflation, depleting central bank's reserves and low investment. Cash-strapped several provinces are also pressuring Argentina on accessing financial markets.

Argentina government is taking all efforts to cut costs to check budget deficit. Inflation is expected to reach 35 percent and the economy is poised to contract this year. Argentina's defaulted amount is estimated to be $80 billion in 2001. It's considered to be largest sovereign debt default at the time. The country is coming forward to make an agreement with bondholders on debt repayment.

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