Case study on Sovereign Debt (Argentina)

[weijian]

2.75bil is not a lot, although the 100year duration is headline grabbing. I reckon these bonds would sit well on bond portfolios that needs multiple maturities/geographies for yield amplification and diversification purposes. In addition, when there are eventual big moves in interest rates, these bonds would be perfect for traders (since the longer the maturity date, the more sensitive the bond is to interest rate changes)

Argentina Plans to Offer 100-Year Bonds

Bonds will be used to finance budget; said to yield 7.917%
Argentina joins Mexico, U.K., Ireland in issuing 100-year debt

Argentina sold 100-year bonds barely a year after settling a protracted legal dispute tied to a $95 billion default. With the $2.75 billion sale, the government of South America’s second-largest economy joins Mexico, Ireland and the U.K. in issuing debt that matures over a century, which is often particularly attractive to insurers and pension funds seeking to lock in long-term returns. Argentina, for its part, is taking advantage of historically low borrowing costs to finance the budget and pay off debt that’s maturing in the next few years.

https://www.bloomberg.com/news/articles/...-as-monday

[brattzz]

100 years bond offerings are sooo spectulative that they might as well sell 100 trillion worth of it!!

eternity bonds!!

[specuvestor]

Hope he is not getting nearing hubris

"Aggressive, tenacious and litigious to a fault, Paul Singer may be the most feared activist investor in the world—by hedge fund rivals, companies and even countries. Singer’s Elliott Management Corp., which manages $34 billion of assets, has rarely been out of the headlines the past 18 months. And there’s little indication that will change soon.

Singer has targeted the world’s biggest mining company, taken on Warren Buffett in a battle for Texas’s largest electricity distributor, ousted chief executive officers on both sides of the Atlantic and set off a chain of events that led to the impeachment of South Korea’s president.

Singer is best known for battling Argentina for 15 years over its debt default—and impounding one of the country’s war ships in the process. Certainly, his impact is undeniable. He started with just $1.3 million from family and friends in 1977, and the fund’s investments in equity and debt have since led to at least $93 billion in corporate asset sales and share buybacks, according to data compiled by Bloomberg."

-snip-

https://www.bloomberg.com/graphics/2017-...anagement/

[weijian]

hi specuvestor,
Would appreciate it if you would adhere to good forum habits by adding in the link to the article.
I had happen to read the same news this morning from Bloomberg and so will do the service..

Moderator

[cyclone]

Argentina looks be headed for another economic storm

Silvia Amaro
May 9, 2018

Argentina has started talks with the International Monetary Fund seeking financial rescue once again, as inflation soars and the currency sinks.

Buenos Aires looks to be going through another economic nightmare, with prices rising rapidly while the Argentine peso drops. The central bank announced last week another increase in rates to 40 percent — as the 12-month inflation rate hit 25.4 percent, above its 15 percent target. At the same time, since the start of the year, the peso is down by more than 20 percent against the U.S. dollar.

"Argentina is still a difficult country and unless they do reforms then it's going to be having issues," Michele Gesualdi, the chief investment officer at Kairos Investment Management, told CNBC's "Squawk Box Europe" Wednesday.

More details in https://www.cnbc.com/2018/05/09/argentin...storm.html

[weijian]

These sovereign 'vultures' actually operate very similarly to distressed debt investors of corporates (like the esteemed Howard Marks). One key standout would be the margin of safety (25cts on the dollar) that these vultures were able to establish. On hindsight, the margin of safety worked out perfect with the risk-reward ratio that was skewed towards the vultures. I reckon they were able to see that on 1 end, these distressed bonds were just one portion of their entire portfolio, but on the other end Argentina had everything to lose if they couldn't secure USD funding (provided that China didn't come in to mess things up).

The glaring lesson I learnt here is that one needs to know how to carry out the enforcement of the rules (ie. HOW to get back your money).

A long read about Paul Singer and his operations. Besides a margin of safety, flawless (and ruthless) execution.

https://www.newyorker.com/magazine/2018/...y-investor

[specuvestor]

So difficult to reverse from Populism once the pandora's box is open

https://www.nytimes.com/2019/08/12/busin...-peso.html

Socrates already foreseen this 3k years ago... nothing new under the sun
https://www.youtube.com/watch?v=fLJBzhcSWTk