L'Argentina comincia da Roma e Milano?

[Sir Wildman]

uppete

[FaGal]

Calling the shots
Nov 17th 2005 | BUENOS AIRES
From The Economist print edition


State borrowers still have the upper hand over foreign bondholders

LIKE the gentler half of a good cop/bad cop routine, the province of Buenos Aires—32% of Argentina's GDP and 40% of its people—is doing its best to soothe foreign bondholders, just nine months after the national government savaged them with a 65% haircut on $80 billion-worth of defaulted bonds. The team from Buenos Aires—now on a road show to promote its own $3 billion restructuring—is offering a better, if still painful, deal: a 50% loss. Most observers think this is likely to be accepted by holders of more than 76% of the bonds—the province's target, and the take-up rate of the sovereign restructuring.

This forecast has less to do with any gratitude on bondholders' part than with the balance of power in the debt market since Argentina's harsh exchange. Although bondholders who held out in other recent sovereign restructurings did win further concessions, the options for those who refused Argentina's terms are few. In the spring a court in New York rejected one distressed-debt hedge fund's bid to delay the exchange. Even if other foreign courts rule against Argentina, they cannot force the government to pay. And the country's own judiciary is unlikely to smile on foreign holdouts when the $20 billion in claims they represent is worth about half a year's tax receipts.

Markets have proved as sympathetic to Argentina as the courts: once rating agencies were happy to declare the country out of default, lenders snapped up new bonds. And while the holdouts' home governments could try to persuade Argentina to reconsider, they have hardly made this a diplomatic priority. “It's very asymmetrical,” says Miguel Kiguel, a former national vice-minister for the economy. “The sovereign has a lot of power versus the bondholders. The lesson is, if you hold out, be ready for a long stakeout.”

The holdouts' best hope is probably the IMF, which says Argentina must develop a plan to address their complaints as a condition of rolling over the $4.4 billion it is owed in 2007. The government needs the money. Despite an ample primary surplus—ie, excluding debt-service costs—it faces a total shortfall of $2.7 billion in 2006 and $6.4 billion in 2007, estimates Fausto Spotorno, of Delphos Investment in Buenos Aires. Delaying payments to the Fund would obviate the need to dip into limited deposits or foreign-currency reserves.

The IMF's worries go well beyond the holdouts' plight. With inflation in double digits, it wants tighter monetary policy and a stronger peso. It also wants meaningful price increases for foreign-owned utilities, most of whose rates have been frozen since the 2001-02 financial crisis. Moreover, relations between the IMF and its debtor have become so chilly that the chances of a refinancing agreement look increasingly remote. Argentina's president, Néstor Kirchner, devoted much of his speech at the recent Summit of the Americas to bashing the Fund.

It is no wonder that so many creditors of Buenos Aires are prepared to settle. It is puzzling, though, that the risk of big losses after a default has bothered bond markets so little. This year J.P. Morgan's emerging-market debt index is heading for a fourth double-digit return in a row. Although this has much to do with improving fundamentals, investors hungry for risky paper should perhaps ask who will call the shots if things take a turn for the worse.

[penta5]

Originalmente inviato da FaGal

Calling the shots
Nov 17th 2005 | BUENOS AIRES
From The Economist print edition


State borrowers still have the upper hand over foreign bondholders

LIKE the gentler half of a good cop/bad cop routine, the province of Buenos Aires—32% of Argentina's GDP and 40% of its people—is doing its best to soothe foreign bondholders, just nine months after the national government savaged them with a 65% haircut on $80 billion-worth of defaulted bonds. The team from Buenos Aires—now on a road show to promote its own $3 billion restructuring—is offering a better, if still painful, deal: a 50% loss. Most observers think this is likely to be accepted by holders of more than 76% of the bonds—the province's target, and the take-up rate of the sovereign restructuring.

This forecast has less to do with any gratitude on bondholders' part than with the balance of power in the debt market since Argentina's harsh exchange. Although bondholders who held out in other recent sovereign restructurings did win further concessions, the options for those who refused Argentina's terms are few. In the spring a court in New York rejected one distressed-debt hedge fund's bid to delay the exchange. Even if other foreign courts rule against Argentina, they cannot force the government to pay. And the country's own judiciary is unlikely to smile on foreign holdouts when the $20 billion in claims they represent is worth about half a year's tax receipts.

Markets have proved as sympathetic to Argentina as the courts: once rating agencies were happy to declare the country out of default, lenders snapped up new bonds. And while the holdouts' home governments could try to persuade Argentina to reconsider, they have hardly made this a diplomatic priority. “It's very asymmetrical,” says Miguel Kiguel, a former national vice-minister for the economy. “The sovereign has a lot of power versus the bondholders. The lesson is, if you hold out, be ready for a long stakeout.”

The holdouts' best hope is probably the IMF, which says Argentina must develop a plan to address their complaints as a condition of rolling over the $4.4 billion it is owed in 2007. The government needs the money. Despite an ample primary surplus—ie, excluding debt-service costs—it faces a total shortfall of $2.7 billion in 2006 and $6.4 billion in 2007, estimates Fausto Spotorno, of Delphos Investment in Buenos Aires. Delaying payments to the Fund would obviate the need to dip into limited deposits or foreign-currency reserves.

The IMF's worries go well beyond the holdouts' plight. With inflation in double digits, it wants tighter monetary policy and a stronger peso. It also wants meaningful price increases for foreign-owned utilities, most of whose rates have been frozen since the 2001-02 financial crisis. Moreover, relations between the IMF and its debtor have become so chilly that the chances of a refinancing agreement look increasingly remote. Argentina's president, Néstor Kirchner, devoted much of his speech at the recent Summit of the Americas to bashing the Fund.

It is no wonder that so many creditors of Buenos Aires are prepared to settle. It is puzzling, though, that the risk of big losses after a default has bothered bond markets so little. This year J.P. Morgan's emerging-market debt index is heading for a fourth double-digit return in a row. Although this has much to do with improving fundamentals, investors hungry for risky paper should perhaps ask who will call the shots if things take a turn for the worse.

quanta bela gente ghe s'era qua' !