Tuesday, March 31, 2020
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ARGENTINA | 04-03-2020 16:04

Creditors offered bond swap ahead of key peso debt payment

Argentina offers investors a swap that debt for new bonds maturing in 2019, in a move that could allow the government to avoid increasing money supply.

Argentina is offering investors who own 17.5 billion Argentine pesos ($2.6 billion) in bonds that come due later this month the opportunity to swap that debt for new bonds maturing in 2019 in a move that could allow the government to avoid increasing the money supply at a time of rising infla

 

Argentina has offered creditors the change to exchange their pesos-denominated bond holdings, prior to a key debt payment due to March 6.

The Economy Ministry is reopening the sale of inflation-linked bonds maturing in August 2021 and will allow creditors to buy bonds with their holding of so-called “trigger bonds” tenancies, or A2M2.

The payment is estimated at 73 billion pesos (US$1.2 billion) – 30 billions pesos (US$480 million) in capital plus an adjustment tied to inflation –according to the consulting firm PxQ. 

The “Trigger bonds” are known as this because the payment size is determined by the activation of a series of conditions.  

The bond’s maturity on March 6 was creating uncertainty amid local investors after the last attempt to swap a large local bill for Argentina's "dual bond" was declared void and the principal payment was delayed until September 30.

“What happens under this title will be key in determining whether the AF20 reprofiling was an isolated case, or, on the contrary, the norm as of this moment,” wrote Emma Álvarez Agis, Executive director of PxQ, in a report. 

A decree passed last week allows the Government to enhance conditions for a swap offer, he added. 

The largest A2M2 bondholder is Legg Mason Inc., with seven percent of the holdings, based on Bloomberg stats from January 31. 

Argentina is also auctioning notes related to Badlar that can only be bought with Pesos.

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