Argentina's bond exchange: Argentina comes in from the cold
Bond exchange reopening should allow sovereign back on to international capital markets – at a price.
More than eight years after it defaulted on some $82 billion of debt, Argentina soon hopes to close one of the most wretched chapters in its history as it reopens its controversial restructuring offer to recalcitrant investors.
The first deal in June 2005, which paid 33.7 cents on the dollar, was taken up by 76% of bondholders. Since then the 24% of investors that stayed out – predominantly hedge funds but also retail accounts – have taken drastic measures to recoup the full value of the bonds, including filing lawsuits in the US courts and making claims on Argentine assets. Initially the Argentine government, led at the time by Néstor Kirchner, refused to contemplate reopening the offer and ordered Congress to pass a law to forbid it happening.
The impasse meant that Argentina was blocked from issuing debt in the international capital markets. For a while that didn’t matter. Argentina raised money by selling $8.5 billion of debt in the local markets. It also borrowed $7.6 billion from its oil-rich neighbour, Venezuela. And after shrinking by more than 10% after the government’s default, the economy revived in the following years, with growth peaking at 8.7% in 2007.