Argentina details bond restructuring proposal in SEC filing

By Reshmi Basu

New York, June 14 - Argentina filed details of its latest restructuring proposal for $81.2 billion of defaulted debt to the U.S. Securities Exchange and Commission.

The government said it would issue three new debt securities: par bonds, discount bonds and quasi-par bonds.

Holders will be entitled to payments contingent upon levels of gross domestic product.

In the filing, the government laid out two different scenarios for the financial terms,

In scenario one, if the participation rate for bondholders is equal to or less than 70% of the $81.2 billion of defaulted indebtedness, then the amount of new debt securities issued will be $38.5 billion.

Under scenario two, if the bondholder participation is greater than 70%, the maximum total new debt issued will be $44.2 billion.

Par bonds

For scenario one, par bonds will be issued up to a maximum of $10 billion.

The coupon will be 1.35% for years one to five, then stepping up to 2.50% for years six to 15; 3.75% for years 16 to 25 and 5.25% for years 26 to 35 years.

For scenario two, par bonds will be issued up to a maximum of $15 billion.

The coupon will be 2.08% for years one to five, 2.50% for years six to 15; 3.75% for years 16 to 25 and 5.25% for years 26 to 35 years.

For both scenarios, the par bonds' maturity will be 35 years from date of issue with equal semi-annual payments of principal from year 25.

Discount bonds

Under scenario one, discount bonds will be issued up to a maximum amount of $20.17 billion. This will be equal to 66% of the outstanding amount of tendered debt securities.

The coupon is: 3.97% cash, 4.35% capitalized for years one to five; 5.77% cash, 2.55% capitalized for years six to 10; and 8.32% cash, 0% capitalized for years 11 to 30.

Under scenario two, discount bonds will be issued up to a maximum of $19.87 billion.

This will be equal to 63% of the outstanding amount of tendered debt securities.

The coupon is: 4.15% cash, 4.36% capitalized for year one to five; 4.88% cash, 3.63% capitalized for years six to 10; 8.51% cash, 0% capitalized for years 11 to 30.

Under both scenarios, the maturity will be 30 years from the date of issue.

Quasi-par bonds

In either scenario, the maximum amount of quasi-par bonds will be the peso equivalent of $8.33 billion. These securities are expected to be issued primarily in the domestic market.

They will have a 42-year maturity, with amortization beginning in year 32.

In scenario one, they will pay peso interest that is the equivalent of a dollar rate of 5.57%, capitalized through year 10 and in cash after that.

In scenario two, they will pay peso interest that is the equivalent of a dollar rate of 5.96%, capitalized through year 10 and in cash after that.

In scenario one the convertability ratio to dollars will be 30.6%, adjusted over time. In scenario two the ratio starts at 29.5%.

GDP-linked units

Argentina will also issue detachable GDP-linked units in an amount equal to the debt tendered.

Holders will receive 5% of excess GDP, divided by the average free market peso exchange rate for the respective currency, either dollars, euros or yen. Payment is annually beginning in 2006.

Excess GDP is the amount by which annual GDP growth exceeds 3%.

They mature in 30 years.

Past-due interest

New securities will not be issued for past-due interest.

For past-due interest, the Argentinean government previously said it will pay past-due interest through June 2004 of $22.5 billion if more than 70% of bondholders participate in the exchange.

If less than 70% accept the government will pay past-due interest totaling $18.2 billion.

Full faith and credit

The new debt securities will be direct, unconditional, unsecured and unsubordinated obligations of the government.

"Argentina will pledge its full faith and credit to make all payments of principal and interest on the debt securities when due and to perform all the covenants in debt securities," the government said in the filing.

The government said as long as the new debt securities remained outstanding, the government would not create any security interest in its assets or revenues to secure its public external indebtness.

The new securities will also contain collective action clauses.

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