Argentina accepts tenders for $12.86 billion bonds in exchange offer

By Jennifer Chiou

New York, July 2 - The Republic of Argentina announced the final results of its previously completed debt exchange, stating that it accepted total tenders for $12,862,131,347.91 of government securities.

Just after the offer ended at 5 p.m. ET on June 22, the issuer's minister of public finance Amado Boudou reported that its offer had achieved a 66% acceptance level, representing $12,067,000,000 of the government securities.

Boudou had said that the outcome of the trade "comfortably exceeds expectations we had raised."

He also said Argentina will work to resolve its Paris Club debt, but it will wait until the time is best for the country to do so, according to a prior news release.

As previously reported, bonds eligible for participation were divided into two categories: those issued before 2005 and those issued in 2005.

The pre-2005 eligible securities totaled $18.3 billion, including $17.6 billion of principal and $700 million of accrued but unpaid interest as of Dec. 31, 2001, based on currency exchange rates in effect on Dec. 31, 2003.

The offer began on April 30, and the deadline was extended one time from June 7.

Pre-2005 bonds

Holders of pre-2005 eligible securities could choose a discount option or a par option.

Those who chose the discount option received a combination of discount bonds due December 2033, 8¾% global bonds due June 2, 2017 and GDP-linked securities expiring no later than in December 2025.

The issue price for the global bonds was 90.11.

For each $1,000 eligible amount of dollar-denominated securities, the payout under this option was $337 principal amount of discount bonds, $93 principal amount of global bonds and $1,000 notional amount of GDP-linked securities.

For each €1,000 eligible amount of euro-denominated securities, the payout under this option was €337 of discount bonds, $110 of global bonds and €1,000 of GDP-linked securities.

For each £1,000 eligible amount of pound-denominated securities, the payout under this option was €478 of discount bonds, $157 of global bonds and €1,419 of GDP-linked securities.

For each CHF 1,000 eligible amount of Swiss franc-denominated securities, the payout under this option was €216 of discount bonds, $71 of global bonds and €640 of GDP-linked securities.

For each ¥100,000 eligible amount of yen-denominated securities, the payout under this option was €249 of discount bonds, $81 of global bonds and €740 of GDP-linked securities.

For each Ps. 1,000 eligible amount of Argentine peso-denominated securities, the payout under this option was Ps. 337 of discount bonds, $21 of global bonds and Ps. 1,000 of GDP-linked securities.

Those who chose the par option received par bonds due December 2038, a cash payment and GDP-linked securities.

Of the total tender amount, holders of 12,862,131,347.91 of the securities elected the par option. Argentina said it expects to make cash payments to holders of pre-2005 bonds who are allocated the par option an amount of $146,162,176.33.

The discount bonds denominated in dollars, euros and Argentinean pesos will have coupons of 8.28%, 7.82% and 5.83%, respectively.

The par bonds denominated in dollars, euros and Argentinean pesos will have initial coupons of 2.5%, 2.26% and 1.18%, respectively. These will step up to 3.75%, 3.38% and 1.77%, respectively, on March 31, 2019 and to 5.25%, 4.74% and 2.48%, respectively, on March 31, 2029.

The GDP-linked securities will not pay interest. Argentina will make payments on these securities on Dec. 15 of each year, the amount of which will be based on its GDP.

For holders of bonds denominated in dollars, euros or Argentine pesos who elected the discount option, the principal amount of discount bonds to be received was equal to 33.7% of the eligible amount of the securities tendered, and those electing the par option received par bonds in a principal amount equal to 100% of the eligible amount of their tendered securities.

Holders of bonds denominated in pounds sterling who elected the discount option received a principal amount of discount bonds equal to 47.8% of the eligible amount of the securities they tendered, and those electing the par option received par bonds in a principal amount equal to 141.9% of the eligible amount of their tendered securities.

For bonds denominated in Swiss francs, the ratios are 21.6% of par for those electing the discount option and 64% of par for those choosing the par option.

For bonds denominated in yen, the ratios are 24.9% of par for those electing the discount option and 74% of par for those choosing the par option.

The amount of global bonds to be issued to holders who chose the discount option was a principal amount equal to $0.2907576, €0.2726930 or Ps. 0.2657117 for each $1.00, €1.00 or Ps. 1.00 eligible amount of securities exchanged.

The cash amount to be issued to holders who chose the par option was $0.0823250, €0.0743000 or Ps. 0.0517113 for each $1.00, €1.00 or Ps. 1.00, respectively, original principal amount of par bonds received in exchange for tendered securities.

Holders could elect the par option for up to $50,000, €40,000, ₤30,000, CHF 60,000, ¥5 million or Ps. 150,000, as the case may be, in outstanding principal amount of eligible securities.

In any case, the republic was to issue no more than $2 billion of par bonds. Because this option was oversubscribed, Argentina allocated on a pro rata basis. The provisionally determined proration factor was 75.2593%.

2005 bonds

Holders of 2005 eligible securities also could choose either to receive discount bonds or par bonds.

Those who chose the discount option received a principal amount of discount bonds equal to 33.7% of the eligible amount of the securities they tendered and those electing the par option received par bonds in a principal amount equal to 100% of the eligible amount of their tendered securities.

In each case, the amount of bonds received was decreased by an amount determined using a series of factors that is dependent on the bonds exchanged.

Under the discount option, the principal amount of discount bonds to be received was $231 per $1,000 eligible amount of dollar-denominated bonds governed by New York law, $223 per $1,000 eligible amount of dollar-denominated bonds governed by Argentine law, €218 per €1,000 eligible amount of euro-denominated bonds and Ps. 196 per Ps. 1,000 eligible amount of Argentina peso-denominated bonds.

Under the par option, the principal amount of par bonds to be received was $235 per $1,000 eligible amount of dollar-denominated bonds governed by New York law, $228 per $1,000 eligible amount of dollar-denominated bonds governed by Argentine law, €227 per €1,000 eligible amount of euro-denominated bonds, Ps. 236 per Ps. 1,000 eligible amount of Argentina peso-denominated bonds and Ps. 320 per Ps. 1,000 eligible amount of Argentina peso-denominated quasi-par bonds.

Cash offering

Concurrently with the exchange offer, Argentina offered $1 billion principal amount of 8¾% global bonds due 2017 for cash and sold $738 million. The exchange offer was conditioned on the receipt of the proceeds from the offering.

Final settlement is earmarked for Aug. 11.

The joint dealer managers were Barclays Capital Inc., Citigroup Global Markets Inc. and Deutsche Bank Securities Inc.

The exchange agent was Bank of New York Mellon (732 667-9754), and the information agent was Georgson Srl (66 742-4029, +39 06 42 17 17 77, +39 06 42 17 17 77, 800 189922, +39 06 42 17 17 17, 0800 000 1564 or +39 06 42 17 17 77).

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