Argentina makes triumphant return to bond markets with $16.5bn deal

Market pariah returns to market with one of the largest order books ever seen for an emerging markets bond

The Buenos Aires Stock Exchange, Argentina. A market pariah since a 2001 default, Argentina was welcomed back to the club of borrowing nations on Tuesday with one of the largest order books ever seen for an emerging markets bond. (Photograph: Marcos Brindicci/Reuters)

The Buenos Aires Stock Exchange, Argentina. A market pariah since a 2001 default, Argentina was welcomed back to the club of borrowing nations on Tuesday with one of the largest order books ever seen for an emerging markets bond. (Photograph: Marcos Brindicci/Reuters)

 

Argentina made a triumphant return to the international bond markets on Tuesday, launching a bigger-than-expected $16.5 billion (€14.6 bn)offering that amassed a whopping $68bn-plus in orders.

A market pariah since a 2001 default, Argentina was welcomed back to the club of borrowing nations with one of the largest order books ever seen for an emerging markets bond. That allowed it to achieve tight pricing across all four tranches, underscoring the market’s eagerness to get in on one of the marquee offerings of the year so far.

“Argentina is a grab-fest out there,” one New York-based investor told IFR. Some in the market doubted the sovereign, plagued by defaults in the past and an uncertain political climate in the present, would reach its ambitious pricing goals. But on the day, it was able to sell a US$6.5bn 10-year, the centerpiece of the offering, at 7.5 per cent. It also is selling a US$2.75bn three-year at 6.25 per cent, a US$4.5bn five-year at 6.875 per cent and a US$2.75bn 30-year at 8 per cent with a 7.625 per cent coupon.

New President Mauricio Macri wasted little time after taking office in December in agreeing terms with holdout creditors who had rejected the country’s debt restructuring after 2001. A decade-long court battle ensued. But reaching terms with the litigants paved the way for the sale of Tuesday’s bond. First dibs on the proceeds will go to the holdouts, led by US hedge funds Elliott Management and Aurelius Capital, will get about 75 per cent of what they had claimed under the agreement.

Funds flow

With US$16.5bn coming in, however, the Macri administration should have plenty to spare to help fund its budget deficit as the president overhauls Latin America’s third-largest economy. After being locked out of the international capital markets because of the default, the government was often reliant on printing new money - which sent inflation soaring. “I personally think people under-appreciate the challenges ahead and the small window of opportunity this government has,” the New York investor said. A second investor said the huge order book may have been down to worries about getting a significant chunk of the trade given the frenzy around the deal. “We have been guided to expect very poor allocations,” the investor said. “When you look at the order book, that is to be expected.”

Deutsche Bank, HSBC, JP Morgan and Santander are acting as global coordinators on the bond sale, while BBVA, Citigroup and UBS are joint bookrunners.

Reuters