How Argentina Settled a Billion-Dollar Debt Dispute With Hedge Funds
This article by Alexandra Stevenson for the New York Times may be of interest to subscribers. Here is a section:
After several frantic meetings and heated discussions over conditions, including that the hedge funds continue to have a say in Argentina’s future domestic market fund-raising, NML, Aurelius, Davidson Kempner and Bracebridge signed a deal on Feb. 28. In the agreement, Argentina agreed to pay $4.65 billion to the hedge funds, which included bond principal, interest and “certain legal fees and expenses incurred.”
Two days earlier, Mr. Pollack, the mediator, requested that Judge Griesa sign an order summoning Mr. Pollock and Mr. Singer of Elliott to his offices.
?On Friday, Argentina paid all of the holdout creditors who had agreed to deals — a total of $9.3 billion, the economy ministry said. Elliott received $2.4 billion, a 392 percent return on the original value of the bonds, according to the ministry.
Mauricio Macri is likely to be someone we hear a lot more from in future. Since his inauguration late last year he has come through with what he said he would do during the election campaign. In terms of the improving governance we look for to justify a medium-term bullish argument Argentina didn’t have it and now it does.
The two big requirements that needed to be addressed before the country could get back into good standing with international investors were to normalise the value of the currency and settle with the holdouts from the 2001 default.
As soon as he entered office Macri immediately brushed aside the complicated pegs the Peso had been trading under and allowed it to float freely despite the fact that required a major devaluation. The acrimonious relationship with the funds that had bought Argentine debt after the default has rattled on for more than a decade so it is a major victory to reach a settlement that allows them to put this episode behind them.
The Peso is not a strong currency but it has at least stabilised. The new debt Argentina is now issuing is B- rated and pays a 7% yield which is high yield but not outrageously so. The Global X MSCI Argentina ETF remains in a four-year base formation and is now trading towards the upper side of that congestion area. A sustained move above $22 would signal a return to demand dominance beyond the four-month rebound.
