Argentina discloses bond restructuring proposal

By Reshmi Basu

New York, January 12 - Argentina revealed its restructuring proposal for its $81.2 billion of defaulted debt, which is comprised of $79.7 billion of principal and $2.1 billion of accrued but unpaid interest as of Dec. 31, 2001, according to a prospectus filed with the U.S. Securities Exchange and Commission.

The government said it would issue four new debt securities: par bonds due December 2038, discount bonds due December 2033, quasi-par bonds due December 2045 and GDP-linked securities due December 2035.

The early tender deadline is 4:15 p.m. ET on Feb. 4 and the offer will expire at 4:15 pm ET on Feb. 25.

The results will be announced at 5 p.m. ET on March 18. Settlement is scheduled for April 1 or soon after.

The following bonds are eligible for the swap:

* Discount USD L + 0.8125% (BR) due 2023;

* Discount USD L + 0.8125% (RG) due 2023;

* Par bonds USD 6% (BR) due 2023;

* Par bonds USD 6% (RG) due 2023;

* Discount DEM L + 0.8125% due 2023; and

* Par bonds DEM 5.87% due 2023.

Holders can choose to receive par bonds, discount bonds or quasi-par bonds in the exchange with a ratio of 1.000 for the par bonds, 0.337 for the discount bonds and 0.699 for the quasi-par bonds.

In addition, holders will receive GDP-linked securities with an equivalent notional amount.

No payment will be made for accrued interest after Dec. 31, 2001 except for par Brady bonds and discount Brady bonds.

For the par Brady bonds and discount Brady bonds, a "Brady residual amount" will be assigned equal to the principal amount at Dec. 31, 2001 minus the cash value minus accrued interest after Dec. 31, 2001 on which holders have received payment or are entitled to receive payment by exercising their rights against the collateral securing the interest payments.

For the par Brady bonds and discount Brady bonds, holders will receive:

* The cash from release of the Brady collateral and redemption by the U.S. Treasury or Kreditanstalt für Wiederaufbau of the collateral; plus

* Discount bonds for an original principal amount of 33.7% of the Brady residual amount plus GDP-linked securities of a notional amount equal to the Brady residual amount.

Interest on new securities other than GDP-linked securities will accrue from Dec. 31, 2003. Interest for discount bonds in 2004 will be paid in cash.

Argentina will issue new par bonds up to $10 billion or the equivalent in other currencies if less than 70% or the equivalent of $57.3 billion of the existing bonds is tendered or up to $15 billion if the response is greater than 70%.

For early tenders of up to $50,000 or the equivalent (£30,000, ¥5 million, Ps. 150,000, CHF 60,000), holders will receive par bonds.

If par bonds are left over after this allocation, holders who tender after the early tender deadline will receive par bonds.

Pars will then be issued for the amount of early tenders over $50,000 or equivalent.

Finally, late tenders over $50,000 or equivalent will receive par bonds.

Argentina will issue quasi-par bonds up to Ps. 24.3 billion principal amount in pesos only. These will be allocated on a daily first-come first-served basis.

There is no limitation on the issue of discount bonds.

For current debt in dollars and euros, including predecessor currencies to the euro, holders may choose to receive new bonds in the same currency or in pesos.

For existing bonds pounds and Swiss francs, holders can choose euros or pesos. For yen, holders can choose euro or pesos unless their bonds are covered by Japanese law in which case peso-denominated bonds only are on offer unless they respond to the offer in Japan.

Holders of peso bonds can only receive new peso bonds.

The GDP-linked securities will be denominated in the same currency as the pars, discounts or quasi-pars to which they are initially attached.

The new par bonds will mature Dec. 31, 2038. For dollar bonds, the interest will be at 1.33% from Dec. 31, 2003 to March 31, 2009, then 2.50% to March 31, 2019, then 3.75% to March 31, 2029 and 5.25% to Dec. 31, 2038. For euro bonds, the rates are 1.20%, 2.26%, 3.38% and 4.74% for the same periods. Peso bonds will pay 0.63%, 1.18%, 1.77% and 2.48%. Principal will amortize starting on Sept. 30, 2029.

The new discount bonds will mature Dec. 31, 2033. Dollar bonds will pay interest at 8.25%, euro bonds at 7.82% and peso bonds at 5.83%. Up to Dec. 31, 2013, part will be paid in cash and part will be capitalized. Principal will amortize starting on June 30, 2024.

The new quasi-par bonds will mature Dec. 31, 2045. Interest will be at 3.31% and will be capitalized up to Dec. 31, 2013. Principal will amortize starting on June 30, 2036.

The GDP-linked securities will expire no later than Dec. 15, 2035. They will be equal in notional amount to the securities they are issued with and will trade together for the first 180 days. They will not pay any principal. Payments will be made if Argentina's GDP exceeds a rising base case up to a maximum of 48% per security over the life of that security.

All the bonds will be non-callable.

For 2005 through 2010, Argentina will use 5% of excess GDP to buy back bonds.

The principal amount of peso bonds will be adjusted for inflation using the consumer price index.

The international joint dealers for the swap are Barclays Capital, Merrill Lynch and UBS Investment Bank.

© 2015 Prospect News.
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