Beginning of the End

Nov 1, 2004

Nearly three long years after its default, the Argentine government is about to unveil the details of its "final" offer to bondholders.

In Buenos Aires, government officials continue playing hard ball with creditors.
Argentina's President Néstor Kirchner and Roberto Lavagna, his economy minister, are confident that a majority - albeit a slender one - of bondholders will accept their harsh offer to restructure $84.5 billion worth of defaulted bonds. If they are proved right, Argentina will have imposed the most severe sovereign debt restructuring in recent history, sticking bondholders with NPV losses of 75% to 92%.

Momentum behind the government's offer is gradually building among domestic creditors and foreign investors fatigued and frustrated by their three-year battle with Argentina. When the government unveils its "final" offer in a few weeks' time, the bondholders are likely to find they'll be getting from $38.5 billion to $43.2 billion in new bonds in exchange for their old defaulted bonds.

The scenario paves for the way for Kirchner and Lavagna...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management