FinancialAdvisor's College Class (FACC)

[mick]

i think MSO is in overbought area. did you see how see has to do a bed check each night?

say , i ran across this today.

Argentina Faces Claims From Investors Who Didn't Swap (Update4)
March 4 (Bloomberg) -- Argentina may face lawsuits from investors holding more than $20 billion of defaulted bonds who refused to take part in a debt exchange that the government yesterday said lured more than two-thirds of bondholders.

Nicola Stock, who represents about 450,000 Italian bondholders as co-chairman of the Global Committee of Argentina Bondholders, said today in an e-mail his group is offering legal assistance to investors. The other co-chairman, Hans Humes, said Feb. 23 bondholders with about $25 billion of defaulted debt would file a complaint at the World Bank's International Center for Settlement of Investment Disputes after the restructuring.

``The situation is not over,'' said Roberto Sanchez-Dahl, who helps manage $650 million of Latin American debt at Federated Investment Management in Pittsburgh, Pennsylvania and sold all of his Argentine bonds about 18 months before the 2001 default. The holdouts will ``seek compensation for their losses via justice and the pressure on the country will be quite strong.''

Argentina, South America's second-largest economy, took a step yesterday toward rebuilding credibility among investors four years after walking away from its obligations. Economy Minister Roberto Lavagna said 76 percent of bondholders, representing $62.2 billion of debt, agreed to exchange for new securities worth as little as 25 cents on the dollar, as part of the biggest restructuring in history.

Argentina's currency rose 0.5 percent at 10:09 a.m. in New York to 2.9370 pesos per dollar. The benchmark stock index rose 1.8 percent to 1605.91. The most-traded defaulted bond due 2008 rose 0.5 cent on the dollar to 30.5 cents, according to JPMorgan Chase & Co. At that price, the bond would yield 76 percent.

`Real Good Step'

The restructuring is ``a real good step on the way to normalizing relations with creditors, to getting the recovery stabilized,'' said John Taylor, U.S. Treasury undersecretary for international affairs, in an interview in New York. ``The growth in Argentina has been very good but for it to continue it needs to find a way to make a more attractive environment to businesses, to entrepreneurs, to people who want to create jobs.''

President Nestor Kirchner's government still faces dozens of lawsuits and the threat of more from bondholders who say the country can afford to pay more. The economy expanded more than 8 percent the last two years and the government has built its biggest budget surplus in 50 years.

`Important Stage'

``The restructuring is an important stage in the normalization of Argentina's financial situation but it is not the final step,'' Mohamed El-Erian, who manages $20 billion in emerging market debt at Pacific Investment Management Co., said via e-mail from his office in Newport Beach, California. El-Erian said the country now still faces hurdles in dealing with the holdouts, changing some of the country's laws to help extend the economic recovery and bettering its relationship with the International Monetary Fund.

Armando Torres, spokesman for the Economy Ministry, will comment later today, his office said.

``All files opened in courts so far didn't succeed and there were lots of them,'' Cabinet Chief Alberto Fernandez said in a Feb. 10 interview in Buenos Aires.

Lawrence Wiener, a lawyer who represented holders of about $200 million in defaulted debt, said he recommended his clients to accept the offer because ``we didn't see much possibilities of success in a lawsuit against the country.

``Lawsuits can delay as much as 10 years, and we recommended to accept what the government was offering,'' Wiener said today in an interview.

Borrowing

Argentina, the biggest emerging-market issuer of international debt in the 1990s, defaulted in late 2001 after a growing budget deficit, contracting economy and one-to-one link of the peso to the U.S. dollar made it impossible to keep paying foreign bonds. The government will issue $35 billion of new bonds. Its total debt will fall to $125 billion, or 72 percent of gross domestic product, from $190 billion at end-2004, Lavagna, 62, said yesterday, citing preliminary results.

Brazil's debt represents about 51.5 percent of GDP.

Kirchner, 55, said yesterday the government faces ``another big battle'' in reviving stalled loan negotiations with the IMF. Lavagna will travel to Washington this week to meet with IMF Managing Director Rodrigo de Rato, fund spokesman Thomas Dawson said yesterday at a press briefing in Washington.

``How the debt offer went is going to be an issue of discussion,'' Dawson said.

New Bonds

The new bonds, to be issued April 1, may gain as investors speculate they will be added to benchmark emerging-market indexes.

Standard & Poor's said Feb. 2 it may raise Argentina's foreign currency credit rating to B-, the same level as Ecuador, which defaulted in 1999.

Argentina's new discount U.S. dollar bonds maturing in 2033 probably would yield about 9.30 percent if they were trading today, said Carlos Vyhnak, a sales representative at Banco Mariva SA in Buenos Aires, who helped develop a model to predict prices of the new bonds.

Brazil's 8.25 percent bond maturing in 2034 yields 8.725 percent, according to JPMorgan.

Argentina defaulted on $81.8 billion face value of bonds and by the end of last year had about $20 billion of past-due interest that the country didn't recognize.

The country stopped paying its obligations in late 2001 as a one-to-one currency link made Argentina's economy uncompetitive after neighboring Brazil devalued its currency in 1999. The government froze bank deposits, triggering riots that killed more than a dozen people.

Devaluation

After the default, Argentina let the currency plunge two- thirds against the dollar and reneged on contracts that valued the peso at par with the U.S. currency. The government also is still battling utilities that say it broke agreements after the default by failing to allow them to raise rates.

``There is a lot that remains to be done still, this is only the beginning,'' Alfredo Coto, owner of Coto CISA, Argentina's third biggest supermarket chain, told reporters yesterday in Buenos Aires.

The country restructured about 100 different series of bonds denominated in eight currencies, offering in exchange three different types of bonds. The government plans to issue $15 billion of par bonds, $8.3 billion of quasi-par bonds and $11.9 billion of discount bonds.

``From Argentina's perspective I would say it is successful, but there are still some complications that will make life complicated for the country in terms of holdouts,'' said Jonathan Binder, who manages an emerging market fund for INTL Consilium LLC in Ft. Lauderdale, Florida and took part in the debt swap. ``It remains a country that is unfriendly to investors basically and certainly as a direct investor I would be concerned about going into the country.''



To contact the reporter on this story:
Daniel Helft in Buenos Aires [e-mail] Eliana Raszewski
in Buenos Aires [e-mail]

To contact the editor responsible for this story:
Laura Zelenko at [e-mail]
Last Updated: March 4, 2005 11:36 EST