UPDATE 3-Argentina includes yen bonds in debt swap

(Adds market reaction, details, additional dateline, byline)

By Rika Otsuka and Fiona Ortiz

TOKYO/BUENOS AIRES, March 26 (BestGrowthStock) – Argentina will
offer yen-denominated bonds as part of its plan to exchange new
debt for $20 billion in defaulted debt and return to
international finance markets eight years after a devastating
economic crisis, documents filed in Japan showed on Friday.

Argentine bond prices rose on the government’s new filing
with Japanese financial authorities, which was similar to one a
day earlier but included a yen bond instead of a euro bond.

Argentina, facing tight financing this year, hopes to
return to global markets with debt issues for the first time
since its historic 2001-02 default on $100 billion in debt.

But first it must settle with holders of some $20 billion
in defaulted bonds who did not enter a 2005 restructuring that
forced investors to take steep losses.

The government is filing paperwork in Italy, Japan,
Luxembourg and the United States for an April launch of the
swap, which analysts expect will win a high acceptance rate.
For an analysis see [ID:nN25230272].


Argentina’s country risk (11EMJ: ), which measures the spread
between the yield on a benchmark sovereign bond over the yield
on comparable U.S. treasuries, narrowed by 30 basis points to
614 after the filing in Japan, the tightest level since August

The narrower spread indicates investors are confident the
swap will take place and attract most holders of Argentina’s
defaulted bonds. The impending exchange has compressed
Argentine spreads, reducing the country’s cost of borrowing

In the filing Argentina’s government said it would offer
the bonds in the swap from April 12 to May 7, with a payment
date of June 18.

Only a small percentage of the $20 billion in outstanding
defaulted bonds is held by Japanese investors.

Under a swap option aimed at large-scale investors, known
as the “discount option,” bondholders will receive a 2033 yen
discount bond in exchange for defaulted bonds, at a ratio of
33.7 percent of the face value.

Investors who qualify for that option will be compensated
for back interest they lost out on by not entering the 2005
swap with a 2017 global dollar bond. The filing said the
Argentine government offered $6.189 million in that bond.

Analysts say Argentina’s treatment of compensation for
past-due interest is key to how many investors tender defaulted
bonds in the new exchange.

Under a second option in the swap, which is aimed at
small-scale investors and is called the “par option,” investors
are offered a 49.2 billion yen ($530.5 million) 2038 par bond,
the filing said.

Investors who qualify for that second option were offered a
2013 dollar bond, which is meant to compensate for back
interest. The filing said Argentina would offer $4.327 million
of that bond.

In Friday trade, the price on Argentina’s 2038 Par bonds
rose 1.81 to a bid price of 35.375 (ARGGLB38=RR: ).

Stock Market News

(Additional reporting by Fiona Ortiz in Buenos Aires; Editing
by Theodore d’Afflisio)

UPDATE 3-Argentina includes yen bonds in debt swap