if international investors — not just local ones — were not scrambling all over themselves to buy Argentina's most recent dollar-denominated bond issue.
Yes — evey now and again, I do still intend to write about something other than China.
Argentina's bond issue was governed by Argentine law, not one governed by foreign law. So technically, Argentina has not regained access to the international sovereign bond market. Remember, holders of around $20 billion (face value) of Argentina's "old" eurobonds did not participate in its exchange – legally, Argentina has yet to fully put its default behind it.
But if you can sell local-law bonds to foreign investors, why bother with a Eurobond issue?
No one is forcing international investors to buy Argentine bonds. Creditors are voluntarily opting to invest in a country that:
1) Defaulted at the end of 2001 — not so long ago
2) Took its sweet time before it made an offer to its international bondholders
3) Did not "negotiate" with its bondholders, as they bondholders demanded. Not that I particularly think Argentina should have sat down and negotiated, especially if that meant giving every member of the (not entirely representative) committee a veto over Argentina's ability to launch a deal. Moreover, in a traded market, the "holders" of the old bonds of a distressed debtor may be very different from the likely market for the country's new bonds. The notion that Argentina would negotiate an economic adjustment program with bondholders rather than the IMF was always rather far fetched.
4) Sought and obtained more debt relief than has been the norm in previous emerging market sovereign debt restructurings.
I think Argentina also needed substantial relief – more than other sovereigns — to create a debt structure that offered a chance to escape from the cycle of restructuring and default that has marked Argentina's recent history. Argentina's external sovereign debt to GDP ratio remains quite high even after its restructuring. But Argentina still could have made a slightly better offer. There was scope, for example, for more cash up front to compensate bondholders for an extended period of non-payment. Even those who believe Argentina needed a fair amount of relief would agree that Argentina did not go out of its way to be nice to its creditors.
Yet today, despite its sins, Argentina is raising funds from international investors at an interest rate it could only dream of back in the late 1990s. And at a rate not much above the rate of countries that have treated their creditors more nicely than Argentina, like Brazil and Uruguay.
The current market, with its focus on short-term positioning and trading gains, doesn't seem to worry too much about a sovereign reputation. At least right now, it cares more about Argentina's strong current growth and manageable payment profile than its past behavior.
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