Moody’s predicted a new debt restructuring and the market does the math, but does not risk

Former Chief of Staff, Santiago Cafiero, asks Martín Guzmán for applause for the debt swap. Since then, bond prices never came close to projections

The risk rating agency Moody’s, which yesterday warned about the possible need for a new restructuring of Argentine debt with private creditors, only put into words what the prices of Argentine bonds reflect today. Never since their debut at the end of last year have the Argentine securities that emerged from the restructuring of the Minister of Economy, Martín Guzmán, come close to the parities projected in the negotiation with the bondholders, when a prompt agreement with the IMF was expected to put fiscal accounts back on track and pave the way for the recovery of access to external credit.

None of that happened. And during 2021 the prices of Argentine debt collapsed again at default prices. Still awaiting the understanding with the Monetary Fund, which perhaps now is presumed more imminent, the market now considers that this agreement would be insufficient to achieve, in two years, new financing to face the debt maturities that are beginning to accumulate from 2023. Hence all kinds of projections and calculations regarding eventual returns in different scenarios circulate among investors and analysts. In all these accounts there is a common denominator: whoever is encouraged to buy today, could after two years, obtain high profits. However, judging by prices, the large investment funds believe that it is not the time yet and that there will still be a lot of time to ride a wave that could begin to generate. Not now.

In the market, they consider that the agreement with the IMF would be insufficient to achieve, in two years, new financing to face the debt maturities that begin to accumulate as of 2023

“The market is in ‘see to believe’ mode. 15 months ago, the bondholders entered a swap without knowing what the agreement with the IMF would look like or what the economic roadmap would look like. That decision cost them more than 35% in dollars ”, assured the head of Strategy of GMA Capital, Nery Persichini. According to the analyst, the current price of Argentine bonds discount a “very strong” restructuring scenario in 2023 or 2024. This would imply cuts of over 70%, which is even more extreme than what was negotiated in the 2005 exchange, which led forward the former Minister of Economy, Roberto Lavagna, and that marked a milestone in the history of debt restructurings worldwide.

“With a recovery value from USD 35 in 2023, the accumulated returns could reach up to 30% and up to 40% in 2024. The gains are higher if we assume higher recovery values ​​of the new bonds, ”said Persichini.

Along the same lines, although with much more optimistic estimates regarding an eventual net present value of the post-restructuring bonds in 2022, the partners of the financial consultancy 1816 project that, in an optimal scenario, earnings could reach 99%, without reinvestment of coupons. For example, in the case of bonds maturing in 2029, given their current price, the gain in 2023 would be 8% assuming a present value of USD 35, it would rise 37% with a value of USD 45 and to 66% if the net present value of the securities arising from a new restructuring were located at USD 45.

“15 months ago, the bondholders entered a swap without knowing what the agreement with the IMF would look like or what the economic roadmap would look like. That decision cost them more than 35% in dollars ”(Nery Persichini)

With those same assumptions of net present value, the greatest opportunities would be offered by the securities that mature in 2035 and 2046. In the most optimistic scenario (USD 55) the profit would reach 99% and 97% respectively.

Even so, investors are far from betting on Argentine assets. Conversely, The spirit of the market seems to be more in tune with the anger of the creditors who turned their holdings over to the Guzmán swap in August 2020 and who are now raising their complaints about the government’s delay in presenting an economic plan and resolving the negotiation with the IMF. This was expressed on Tuesday, in an unusual statement issued by the Exchange Bondholders Group, at the peak of the Argentine country risk. “The Argentine government is entering its third year without articulating an economic plan. We analyzed the problems in February and nothing has changed. Running an economy should not be a political or academic exercise. It requires real solutions, not endless procrastination and fantasy, ”the creditors said.

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Reference-www.infobae.com

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