NEW YORK, Jan 13 (IFR) - Argentina is looking to issue an additional US$1bn of 8% Bonar 2020s as part of a debt exchange in an effort to address a spike in upcoming debt maturities.
The new finance team of recently elected president Mauricio Macri said on Wednesday that it intended to tap the existing 8% Bonar 2020s on January 20, while also offering holders the opportunity to exchange Bonar 2017s for the 2020s.
“This proactive debt liability management (operation) reflects the technical expertise of this administration,” said Siobhan Morden, head of LatAm strategy at Nomura.
The country faces heavy amortization payments next year, especially for a country recovering from a balance of payments crisis, and any easing of that burden will help the sovereign, Morden said.
The government has issued about US$7.34bn in 7% Bonars that will mature next year, according to government statistics.
“The curve is steep so they can push investors along the curve for a pick up in yield,” she said. “(But) the decision to extend duration may have less to do with yield and more about a concern in new supply.”
Investors are bracing for a substantial amount of supply out of Argentina this year, especially if the government pays holdout investors in bonds that are likely to be sold into the market.
While they were trading about a 1/4 point lower at a mid-market price of 101.30 on Wednesday, the Bonar 2017s were outperforming the rest of the Argentina sovereign curve which has slipped about half a point today, said a New York based trader.
The announcement comes as Argentina government officials meet with holdout accounts on Wednesday in a first round of negotiations to solve a decade long dispute between the two parties that has effectively kept the South American country out of the international capital markets.
Markets have cheered the new market friendly administration amid hopes that changes are afoot as it looks sweep aside policies of the prior administration of President Cristina Fernandez de Kirchner.
The Macri government successfully let the peso float in December and loosened capital controls imposed by Fernandez de Kirchner.
On Wednesday, the finance ministry also announced that it would hire a new law firm to advise the Republic in its negotiations with creditors.
The government will continue to seek legal advice from Cleary Gottlieb Steen & Hamilton, which long advised the prior government, given the law firms knowledge of the case.
“Argentina wants to show it has a different economic team, and intends to mitigate the tense relations with the holdouts and the courts,” said Morden. “It is interested in showing a different face for Argentina and that includes a different legal team.” (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)