« Three observations about Albanian cabinet ministers | Main | The E.U. just put the nail in the coffin of Scottish independence »
The deal seems to be along expected lines: $5 billion in ten-year bonds with a coupon around 8.5%. The final hitch? Argentina wants the bonds to pay no interest for two years. Fine, that is understandable. But it also wants to prevent Repsol from selling them for the same two-year period.
That I do not understand. Is it to protect the price of current bond issues? That seems like thin gruel. Is there some other advantage to locking in Repsol? Help!
You can follow this conversation by subscribing to the comment feed for this post.
As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.
Having trouble reading this image? View an alternate.
Your Information
(Name and email address are required. Email address will not be displayed with the comment.)
I wouldn't say it's as much to "protect" the price of current bond issues as it is to allow Argentina to issue. Repsol trying to sell $5bn on the open market is equivalent to issuing $5bn on the open market (ok, not exactly, but you get my point). $5bn for Argentina today is a massive issuance. That basically makes it almost impossible for Argentina to issue anything over the next couple of years (it's not just a higher yield, at some point it just becomes difficult to get investors to absorb all of that because of risk limits, balance sheets, blablabla). Oh, and why just two years? Well you have a new presidential administration then, and so CFK is less concerned about that and investors are likely to be less concerned then too (or at least that's the current expectation). I think the interesting story here is that Argy really wants to issue (or at least preserve that option)
Posted by: Federico | February 19, 2014 at 06:57 PM
(Slaps head.) That makes sense! CFK gets the option to issue new bonds if she needs to. Any pressure on Argentina's borrowing capacity gets pushed to the next administration.
Of course, if markets were efficient, then it wouldn't make any difference, but pigs and wings and all that.
Posted by: Noel Maurer | February 19, 2014 at 07:43 PM
I just recently came across your blog and it was like a glass of fresh water in the desert. Interesting ideas and appreciations in particularly on energy matters -my interest- but as well on all other topics. Keep up the good work Noel, I enjoy reading your contributions !
Posted by: Roberto Lozano | February 20, 2014 at 11:05 PM