NEW YORK — Argentina got an enthusiastic welcome back to the club of borrower nations on Monday, amassing more than $65 billion in orders for its first international bond in 15 years.
A market pariah since defaulting on its debt in 2001, the country clearly won over investors with an up to $15 billion bond whose proceeds will help pay its long-complaining creditors.
The surge of demand for the bond, which will price on Tuesday, allowed Argentina to set pricing guidance close to its optimistic funding costs for the ground-breaking deal.
“It is fantastic that Argentina is accessing the market,” said John Baur, a portfolio manager at Eaton Vance. “This is certainly a very important step in the direction of improving the future of Argentina economically.”
Litigant bondholders who rejected the terms of Argentina’s debt restructuring and filed suit for a better payoff will have first dibs on the proceeds of the transaction.
New President Mauricio Macri wasted little time after taking office in December in agreeing terms with most of the holdouts to help smooth his country’s return to the market this week.
The holdouts, led by U.S. hedge funds Elliott Management and Aurelius Capital, will get about 75% of what they had claimed under the agreement.
Meanwhile Argentina gets to draw a line under the messy litigation and re-open the capital taps to help fund Macri’s ambitious overhaul of Latin America’s third-largest economy.
“It is one of the few positive reform stories in the emerging markets space, where you are seeing economic liberalization,” said Baur. “You are not seeing much of that anywhere else in the world.”
The sovereign was able to tighten pricing significantly across most of the four-tranche bond on the back of strong demand.
At over $65 billion, the order book is one of the largest ever seen for an emerging markets bond — even exceeding the $50 billion book for Brazilian oil firm Petrobras’s $11 billion six-tranche deal in 2013, according to IFR data.
It set guidance of 7.5%-7.625% on the 10-year tranche — the centerpiece of the offering — in from initial price thoughts of 8% area that were given to investors.
The yield on the 30-year tightened at guidance to 8% from initial thoughts of 85bp over the 10-year’s yield.
At the short end of the curve, guidance on the three-year was set at 6.25%-6.50% and on the five-year at 6.875%-7.125%.
Deutsche Bank, HSBC, JP Morgan and Santander are acting as global coordinators on the bond sale, while BBVA, Citigroup and UBS are joint bookrunners.
PAUL KILBY
DAVIDE SCIGLIUZZO