(UPDATES with order books)
By Paul Kilby and Davide Scigliuzzo
NEW YORK, April 18 (IFR) - Argentina returned to the international bond markets for the first time in 15 years on Monday as it winds down a long-running battle with investors following its 2001 default.
Argentina announced a US$10bn-$15bn bond, whose proceeds will help pay off the holders of its defaulted bonds who had rejected the payment terms of the country’s debt restructuring.
New President Mauricio Macri wasted little time after taking office in December in agreeing terms with most of the holdouts, led by US hedge funds Elliott Management and Aurelius Capital.
That cleared the way to start wrapping up the messy litigation in the US courts and come back to the bond market, where the new offering is expected to price on Tuesday.
Argentina set initial price thoughts of 6.75% area on a three-year bond and 8% area on a 10-year. A five-year is offered at 50bp below the 10-year yield, and a 30-year at 85bp over it.
“Some clients are a little bit skeptical,” Jorge Piedrahita, CEO of broker Torino Capital, told IFR. “They don’t think is that generous.”
Deutsche Bank, HSBC, JP Morgan and Santander are acting as global coordinators on the bond sale, while BBVA, Citigroup and UBS are joint bookrunners.
Given Argentina’s long history of defaults, investor interest was strong, with order books heard mid-morning at around US$40bn, sources said.
That level of demand is testament to Macri’s campaign to restore confidence in the country and overhaul Latin America’s third-largest economy.
“We looked at valuations [on the new bond] with respect to Argentina’s history,” said one London-based investor who intends to buy the bond.
“It has a good government now, but a poor track record. The Macri story is already in the price.”
Finance Secretary Luis Caputo and his undersecretary Santiago Bausili led two separate teams that met with investors in London, New York, Boston, Los Angeles and Washington.
Caputo was also holding a conference call with other investors on Monday morning about the deal, expected to carry junk-bond ratings of B3/B- from Moody’s and S&P.
After being locked out of the international capital markets because of the default, the government was often reliant on printing new money - which sent inflation soaring.
The holdout creditors, who under the agreement with the government will be getting around 75% of what they demanded, will get first dibs on proceeds of the new deal. (Reporting by Paul Kilby and Davide Scigliuzzo; Additional reporting by Sudip Roy and the IFR team; Writing by Marc Carnegie; Editing by Natalie Harrison)