June 28, 2016 / 4:31 PM / 2 years ago

UPDATE 1-Argentina to offer investors option to sell back GDP warrants

(Updates with more detail)

By Paul Kilby

NEW YORK, June 28 (IFR) - Argentina plans to offer options to investors to retire GDP warrants - a move that could save the South American country some US$9.4bn, the Finance Ministry said on Tuesday.

The structure gives investors the option to sell the instruments to the government, which in turn also could decide to offer to buy back the securities.

The European style options, which were issued as part of the 2005 and 2010 exchanges, are expected to be exercisable in December.

The new government of President Mauricio Macri had been expected to attend to expensive legacy debt after returning to the international bond markets in April for the first time in 15 years.

“This helps eliminate some of the legacy debt of the 2001 default,” said Michael Roche, an EM fixed income analyst at the Seaport Group.

“I had expected them to target the discounts which have a 8.28% coupon, but that would take a fair amount of outlay to extinguish.”

The US dollar warrants issued in 2005 and 2010 can be sold back at 10.25 and 10.00 respectively, while euro and the peso denominated instruments have a sell-back price of 10.00.

The government meanwhile has the option to buy back the 2005 US dollar warrants at 12.00 and the other securities at 11.75.

In a report released earlier on Tuesday, Bank of America analysts put fair value on the US dollar warrants at around 10.20-10.70, slightly north of the secondary price of 10.65.

Since then, the dollar warrants have jumped in value to trade Tuesday afternoon at 10.75-11.25.

Such valuations however could change if the statistics agency INDEC releases a large negative revision of cumulative GDP numbers, Bank of America warned. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)

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