Wednesday, July 15, 2020
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ARGENTINA | 18-02-2020 12:00

Further 're-profiling' of maturities in pesos looms, analysts predict

Next key date for government be March 6, with A2M2 payments worth about US$1 billion due that day. Government may have to resort to the issue as Martin Guzmán’s credibility is being tested by the markets.

Last week's re-profiling of the AF20 bond is a "setback" that "compromises" the strategy the government's debt restructuring attempts, analysts observe.

Furthermore, it triggered doubts in the market about the payment of future maturities of securities in pesos, the local currency.

The fear that postponing more payments of bonds in pesos is latent at present, despite the fact that Economy Minister Martín Guzmán claimed in Congress that AF20 delay is an "encapsulated" case that "does not represent at all the rest of the debt" in national currency.

The AF20 is a title tied to the dollar, but it paid out in pesos with 80 percent in the hands of foreign funds

Maturities in pesos due between March and June total US$626 billion, of which US$172 billion fall in March, according to LCG's calculations.

José Echagüe, a strategist for Consultatio, told Perfil that although the economy minister indicated that the debt in pesos would not be re-profiled, "the peso securities fell and are worth the same as the AF20, despite that promise."

The analyst said that "the market does not believe him" and that "Guzmán has mortgaged his credibility."

Economist Fernando Marull stressed that the "key date" which investors will be watching is "March 6" when A2M2 expires. "It's the equivalent of almost US$1 billion, it's a capital maturity that the private sector has, it's another AF20," he said.

With respect to market uncertainty about the treatment of upcoming peso bond maturities while debt is being renegotiated, Echagüe reasoned: "Why should A2M2 be paid out if it was issued only four months before AF20, at a time when the fate of debt sustainability was also, according to the current government, already in place?”

On March 21, interest on the Monetary Policy Bond 2020 (TJ20 or Bopomo), for the equivalent of US$300 million, also matures.

"The government must work to improve the bidding process and raise funds," fixed Marull.

Hardships

Looking ahead to the maturity of A2M2, LCG's Guido Lorenzo said that "to rebuild the peso debt market and get creditors to trust it again, you have to pay it.”

“I don't think he [Guzmán] will find funds in the market, he can offer a swap with a little more attraction, but if it goes wrong he will have to issue," he pondered.

For Lorenzo, there will be a new key challenge on April 28 when the US$220 billion inflation-adjusted Boncer expires.

Former finance secretary Miguel Kiguel said that "the debt in local legislation is always under risk of re-profiling, as we have seen; the government will make the effort to pay, but if for example the rate that requires refinancing some bonds is very high perhaps it sees that it is not sustainable."

He recalled that in the Lebads auction held the day after the AF20 re-profiling, they were "more expensive" than in previous auctions.

Santiago López Alfaro, from Delphos Investment, noted that Guzmán affirmed he "wanted to revitalise the debt in pesos, obviously the setback of the last bids cost a little that, but if you work with the local capital market and make subscriptions in kind at maturity, I think it is possible to pay the debt in time and form.”

Mirta Fernandez

Mirta Fernandez

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