ARGENTINA ASKS FOR SEC BACKING / THE FINANCIAL TIMES ( RECOMMENDED READING )

Argentina asks for SEC backing

By Jude Webber

Published: January 5 2010 20:15

Amado Boudou, Argentina’s economy minister, will fly to Washington next week armed with plans to lay to rest one of the country’s biggest demons: its pariah debt status.

Mr Boudou goes to the US capital for regular talks with multilateral lenders. His trip on Wednesday is likely to be dominated by official plans to announce a final deal to creditors still unpaid since it collapsed into a default worth nearly $100bn eight years ago.

“We have given the Securities and Exchange Commission some documents and we will be giving them more soon . . . The aim is to launch the offer at the end of the month, as soon as we get SEC approval,” said one government official who asked not to be named.

Argentina’s reputation among investors has been in shreds since the default, and although three-quarters of creditors accepted what was billed as a tough take-it-or-leave-it debt restructuring in 2005, lawsuits from those holding out for better terms have kept Argentina barred from capital markets ever since.

Hungry for cash to fuel President Cristina Fernández’s populist programmes, the government has sold bonds to Venezuela at ruinous rates, plundered state pension funds and, controversially, said it wants to use central bank reserves to pay off some debts.

The central bank has yet to give the green light to the plan, which the president describes as a “rational” use of “excess” funds from near-record reserves but which critics fear could fuel runaway expenditure.

“Argentina needs money and wants to keep on spending so a deal with the so-called ‘hold-outs’ will take out one of the problems market participants have with Argentina,” said Daniel Kerner, an analyst at Eurasia, a consultancy.

Resolving the hold-out issue would clear the way for Argentina to sell a bond on capital markets for the first time since the 2001 default, although the official declined to confirm talk that it hoped to make an issue as early as March.

“Our aim is to return but not at any price. The cost has to be rational,” he said.

Though the government is obliged by law to offer a less attractive deal on paper than in 2005, when creditors received only about a third of their money back, Mr Kerner said market conditions now meant investors would get “a better deal in present value terms”.

The government hopes this will sweeten the deal enough for it to achieve its aim of a 60 per cent take-up. The offer will also bring in $1bn (€694m, £62m) in new cash through the sale of a new bond. An international roadshow is planned in the coming weeks.

Settlement would imp­rove Argentina’s credit credentials, but its unpredictable economic policy, its failure to dispel doubts about the transparency of official statistics and its problems taming inflation are likely to make any new debt issued expensive compared with bonds issued by Brazil and Chile.

Mr Kerner said: “What they want to do with reserves makes very clear they will pay their debts.”

Copyright The Financial Times Limited 2010