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Capital Markets

Argentina: Sovereign debt swap struggles for support

Lower-than-expected acceptance rate for first phase; Deal is key to market re-entry

Argentine Economy minister Amado Boudou

Boudou speaks in front of a chart showing Argentina’s debt growth

Argentina’s hopes of getting at least 70% of holders of $20 billion of loans to accept a debt swap hang in the balance after lower than expected demand for the first phase. Only 45% of bondholders took part in the first institutional phase, which closed last month, less than the 60% that the government expected at that stage. Separately but in another blow to the government, Thomas Griesa, a US judge, embargoed $2.43 billion in assets held by state-owned Banco de la Nación in the US in response to class-action lawsuits, making it unlikely that those plaintiff investors will take part in the swap. The deal’s success now appears to rest with retail creditors, especially those in Italy, which, traditionally, have been among the most hostile to Argentina’s actions. Retail investors are owed more than $5 billion. The transaction is seen as a key landmark to Argentina returning to the international capital markets.

The early tender period for big institutional investors opened on May 3; it closed on May 14.

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