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Province of Buenos Aires hits a sweet spot

Analysts expect the Province of Buenos Aires to achieve a 90% participation rate for its $3 billion debt restructuring, when it closes on December 16. If it succeeds, it will be a stunning result, given that those investors who accept the restructuring own debt worth about 40 cents on the original dollar.

Typically, a deal with a 60% haircut would be considered derisory and insulting. But the rules of the game have changed following the sovereign’s restructuring earlier this year. The province’s terms are much more favourable than those offered by the sovereign and are much more favourable than Argentina’s holdouts can expect to receive if and when the sovereign’s exchange offer is reopened.

The Province of Buenos Aires has 16 bonds outstanding, which have been in default for almost four years. Many were sold to Italian retail investors and some traded as low as 18 cents on the dollar. Today, those bonds are worth about 50 cents on the dollar,

One old adversary from the sovereign days, however, has ultimately refused to bend. The province bent over backwards to consult with Nicola Stock in Italy, whose Task Force Argentina organization represents 32,000 Italian bondholders holding 22% of the province’s debt.

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