City and provinceSunday, August 24, 2014
Default shuts BA bond-issuing window
Borrowing costs for the province and city of Buenos Aires, which both sought to issue foreign-currency debt this year, have surged since New York Judge Thomas Griesa’s ruling prevented the country from making a bond payment by July 30. Since then, yields on the province’s debt due 2015 have jumped about seven percentage points to just under 20 percent, while those on the city’s similar-maturity notes climbed about six percentage points to 16.7 percent.
Analysts say the bond-sale plans are being jeopardized by the inability to reach a deal with creditors led by billionaire Paul Singer’s Elliott Management over defaulted debt from the 2001 crisis. Prior to the country’s default last month, the province and city met with investors to gauge demand for offerings yielding below 12 percent and 10 percent, respectively, according to Ray Zucaro, a money manager at SW Asset Management who participated in the talks.
“They didn't take advantage of a window where they had one,” Zucaro, who helps oversee US$420 million of assets, including Buenos Aires province bonds, said in a telephone interview from Miami. “Perhaps they thought rates would come down if the country’s legal problems had been solved.”
Buenos Aires province planned to raise about US$1 billion abroad and had sent invitations to investment banks to present proposals, people with direct knowledge of the matter said in May.