NEW YORK, Aug 14 (IFR) - Owning just US$25m of bonds may be
all it takes to accelerate payments on US$30bn of Argentina's
restructured debt, if holders of a particularly small series of
New York-law Pars decide to pull the trigger.
Among all the bonds eligible to be accelerated, one Par in
particular - the US dollar-denominated 2.50% December 2038, on
which the sovereign has just US$95.3m outstanding - has been the
focus of investor attention.
"We have seen investors taking positions in the smaller
series of Par bonds since the beginning of the year," said Jorge
Piedrahita, chief executive officer of Torino Capital, a
brokerage firm focusing on distressed debt in emerging markets.
"They are paying premium prices for illiquid bonds, but with
just US$25m you can effectively control the acceleration
process," he said.
After Argentina's July 30 default, investors representing at
least 25% in nominal amount of any particular series of
restructured notes can declare their principal and interest
immediately due and payable, which is known as acceleration.
Excluding certain restructured bonds issued under Argentine
and Japanese law, the Par bond identified by ISIN code
XS0501195647 is the smallest series outstanding among the
sovereign's restructured bonds - and hence the easiest target
"When people were making their bets on acceleration, they
were thinking this Par series would be the easiest on which to
reach the acceleration threshold," said a hedge fund manager
familiar with the situation.
Some restructured bonds issued under Argentine and Japanese
law are even smaller in size, but hedge funds would be less
willing to litigate under those jurisdictions.
Piedrahita said accounts may have already reached the
required critical mass of 25% of face value, as they started
accumulating positions as far back as several months ago.
While acceleration on one series does not automatically
trigger acceleration on all of them, a cascade effect is likely.
"It is not automatic, but once there has been (acceleration)
in one series, everyone else will follow," said the hedge fund
Nearly US$30bn in restructured bonds could be accelerated,
which would undermine the sovereign's ability to pay - and
potentially trigger another restructuring.
Holders of Argentina's Pars have the greatest incentive to
pull the trigger, as the securities they own trade at around 50
cents on the dollar but become immediately due at par if
Their claim, however, is somewhat weakened within the first
60 days from Argentina's July 30 default on the Discounts, as
any acceleration on the Pars would automatically be reversed if
payments on the Discounts resume.
The next coupon payment on the Par bonds is due on September
30. Par holders would be in a stronger position to accelerate
after October 30, when the 30-day grace period for the payment
(Reporting by Davide Scigliuzzo; Editing by Paul Kilby and Marc