NEW YORK, June 20 (IFR) - Distressed-debt and
special-situation investors have been snapping up defaulted
Argentine bonds, looking to cash in from any eventual settlement
between the sovereign and holdout creditors.
They got a boost Friday after President Cristina Fernandez
de Kirchner said she would negotiate with the creditors, sending
the restructured discounts some seven points higher to 83.00.
While restructured bond prices have seen dramatic price
swings this week as investors reacted to the latest twists and
turns in the long-running dispute, untendered debt has held
steady - and in some cases has risen 20 points.
The Argentine bonds, which weren't exchanged for new notes
during the 2005 and 2010 restructurings, are often hard to
source. Many were issued in the UK, Germany and Italy before the
country's depression in the early 2000s.
"We have been scouring for scraps of untendered Argentine
sovereign notes and the price action has been quite
unambiguous," said Michael Roche, emerging-markets strategist at
boutique investment firm The Seaport Group.
"Some are held by unorganized investors. Some have been
The highest price, for a 10.5% November 2002 bond originally
issued in Deutschmarks and now denominated in euros, was logged
in today at 78, said Roche.
Untendered bonds issued under New York law are quoted at the
highest prices, followed by those issued under UK, German and
Notes issued under New York law stand to benefit directly
from a settlement of the dispute between Argentina and the
holdouts, while the fate of notes issued in other jurisdictions
"Some of the bonds might have fallen behind the radiator,
but we understand that virtually all of the New York-law bonds
are subject to lawsuits pending before Griesa," said
Henry Weisburg, a partner at law firm Sherman & Sterling.
Distressed-debt buyers, however, are betting that if
Argentina is forced into a new restructuring, it will have to
negotiate with holdouts across all jurisdictions.
"We think the price differential due to the securities'
governing law will close, as Argentina will likely want to put
all the unrestructured debt behind them," said Roche.
Rewards could be huge. Assuming that a deal with holdouts
included 25% of cash and 75% of new local-law bonds issued at a
price of around 85 cents to the dollar, the untendered notes
could be valued at as much as 88 cents, said Roche.
That still leaves considerable upside on untendered debt,
even after the recent rally.
(Reporting by Davide Scigliuzzo; Editing by Paul Kilby and Marc