Argentina planning $15 billion bond sale in market return

Bloomberg

Argentina plans to sell as much as $15 billion of bonds in its return to global bond markets after more than a decade of isolation, setting the stage for the biggest emerging-market sovereign sale since at least 1999.
The nation reduced the yields it was initially offering investors after surveying potential buyers about their interest in the sale. The South American nation is offering notes that mature in three, five, 10 and 30 years, according to people with knowledge of the matter, who asked not to be identified because the sale is private.
The sale, which is slated for tomorrow, will mark the end of Argentina’s pariah status among international investors after it defaulted on a then-record $95 billion in debt in 2001. It avoided tapping global bond markets amid litigation with creditors led by billionaire Paul Singer’s Elliott Management, who reached a deal with the government in February to settle their claims and will be paid with the cash raised by the sale. Any remaining funds will be used for general government purposes.
“They will encounter a good appetite from the market,” said Giuliano Palumbo, a Milan-based money manager at Arca SGR. “If we compare with peers, we find that Argentina’s guidance is quite generous.”
The country is seeking to issue three-year debt to yield as low as 6.25 percent, five-year debt at as low as 6.875 percent, 10-year bonds at as low as 7.5 percent and 30-year bonds at 8 percent, the people said. The 30-year bonds are expected to sell at a 7.625 percent coupon, they said.
On average, bonds maturing in 7 to 10 years issued by junk-rated emerging-market countries yield 6.1 percent, according to Bloomberg indexes.
The sale will be the largest by an emerging-market sovereign borrower since at least 1999 and comes during the worst start of the year for bond issuance from the developing world since 2010. Government officials including Finance Secretary Luis Caputo traveled last week to the U.S. and U.K. to meet with several dozen investors from hedge funds, mutual funds, insurance companies, and pension funds.
Argentina had a “very credible team who have done a great deal in a short amount of time,” said Jim Craige, a money manager at Stone Harbor Investment Partners, who participated in the roadshow. “We hope this ushers in a culture of professionalism and prudent fiscal management for future administrations long after Caputo and team retire from public service.”
Finance Minister Alfonso Prat-Gay last week described interest in the bonds as “awesome.” The nation aims to pay the settlement with creditors by the end of this week, with $10.5 billion of the money raised in the bonds sale going to them, he said.
Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co., and Banco Santander SA are global coordinators for the offer. Banco Bilbao Vizcaya Argentaria SA, Citigroup Inc., and UBS Group AG are joint bookrunners.
The notes are expected to be rated six levels below the lowest investment-grade classification by Moody’s Investors Service. The company raised its rating for Argentina last week after a U.S. court decided to allow the country to resume servicing its debts, paving the way for the nation to tap markets and repay the holdout creditors.
Another rating increase will depend on continued progress in fixing the country’s economy and reducing the fiscal deficit and inflation, the analysts said. Improved data reporting may also support the rating, according to Moody’s.