Gustavo Bazzan
08/30/2020 - 0:06
- Clarín.com
- Economy
The Minister of the Economy, Martín Guzmán, plans to announce what could be defined as a “total swap” of the debt, that is, 100% of the bonds in dollars , both those issued under foreign and local law.
For the size of the announcement, it clings to the conviction that in all the series of exchangeable bonds the goals set in the Collective Action Clauses (CAC), which had different levels of demand, were reached and exceeded : 85% for Par and Discount bonds and 66% for bonds issued as of 2016.
If these percentages are met, the decision of the majority is imposed on the minority. Or as the lawyers say, if the voting thresholds are reached, the proposed amendments will be conclusive and binding on all holders of such series, whether they have consented to the exchange or not.
In other words, compliance with the CACs takes vulture funds off the field . It happens that the defaulted bonds in 2002 that they wanted to exchange in 2005 did not include these clauses . That is why those who kept them in their power and rejected the offers of the 2005 and 2010 exchanges were able to continue to act in the New York Court, despite having in their possession slightly less than 8% of the exchangeable bonds.
Now that changes. There is no risk of vulture funds.
That is why Guzmán is in a position to announce that the debt swap will have been total, 100%. For the simple reason that there is no future for bonds that are not presented for exchange . Those who are not satisfied with the offer presented by the Government, will still take the new bonds.
In fact, Guzmán has already sent a message to the local Caja de Valores and his foreign peers, so that they process all the registered bonds , that is, that they do not limit themselves to processing only the exchange orders presented. All bonuses will be redeemed . The bonds of those who accepted the offer and so officially declared it, and the bonds of those who did nothing.
Applause. The Chief of Staff, Santiago Cafiero, together with the Minister of Economy, Martín Guzmán, the day after it was announced that the bondholders accepted the Argentine offer. Photo Chief of Cabinet / Pablo Duberti
Beyond this, what was known until yesterday was that the acceptance percentage of foreign law bonds - the exchange closed on Friday at 5 p.m. New York time - had reached a floor of 90%. It was no surprise, given that the large groups of bondholders had publicly expressed their support for the offer, and had recommended accepting it.
At the local law exchange level, the data were similar. As of Friday night, 83% of acceptances had been received and as the first window closing is Wednesday, September 1 in the afternoon, no less than 95% acceptance was expected. The local law debt tranche has a second acceptance period, which runs from September 2 to 15. The difference is that those who enter the first closing will receive more accrued interest.
The savings generated by this total exchange operation is significant. According to a report by the Congressional Budget Office , debt services are reduced by approximately US $ 56.1 billion in the period 2020-2024, representing a cumulative decrease in gross financing needs of 13.2% of GDP ( on average 2.6% of GDP each year). For the 2020-2030 period, the accumulated difference is US $ 49,000 million.
In the case of foreign law bonds, creditors will have the new papers credited on Friday, September 4 . In other words, on that day, but more likely on Monday, September 7, we will see what the bondholders do : if they keep the papers in their hands or go out to sell them . It is a key moment, because there it will be determined where the country risk goes .
The new bonds would yield on their debut, analysts estimate, at a rate of between 12 and 13% per year. That is, 1,300 basis points. The country risk is measured by the extra points that the Argentine debt yields on the 10-year bond of the United States. This bond, given the Fed's ultra-low interest rate policy, was yielding just 72 basis points on Friday . So the post-swap Argentine country risk would be around 1100/1200 points.
It is a number that triples the 320 points of Brazil, the 254 points of Colombia or the 116 of Peru. Ecuador, which is closing the exchange this Monday, is at 2815 points, above the 2,150 points of Argentina pre-exchange.
The big question investors are asking is where the Argentine country risk will go in the post-swap era. The market will look very carefully at the Budget 2021 bill and the conversations with the IMF, especially to imagine the government's willingness to move forward with the reduction of the fiscal deficit, which this year would close at no less than 8 points of GDP. From now on, what happens with the gap in the exchange market will also be closely monitored.