On Wall Street they attribute a "high probability of default" for Argentine bonds


Recent reports of Merrill Lynch, Moody's and JP Morgan they gave signs of asset weakness alert Argentine financial and anticipated a debt restructuring or default scenario sovereign of Argentina.

A report of Moody's said that "the economic and financial situation of Argentina will continue in contraction before a increased political risk", while questioning the latest measures taken by the Government to be"negative in credit terms for the sovereign, provinces and municipalities, and for most business sectors. "

"The result of primary elections nationals of Argentina triggered a severe reaction of the market, as a result of which the Government announced several measures, such as the freezing of the prices of some products, capital controls and 'reperfilation' of the debt sovereign, "the report detailed.

"The difficult economic situation, monetary volatility, high inflation and the current political uncertainty generate a negative credit environment and add pressure on finances of the Government, "he said Thursday Gersan Zurita, Senior Vice President of Moody's.

For Moody's, the provinces and municipalities "will have liquidity problems as a result of the difficulty in refinancing debt maturities due to the restriction of market access ", while" the high financing costs and rising inflation will harm many Argentine companies. "

The risk rating agency stressed that "the exporters will be favored for the depreciation of the peso, "although it expects" a weakening of corporate debt coverage and of liquidity in the next 12-18 months due to persistently high inflation and higher financing costs. "

He also warned about the "decrease in deposits" from the primary elections, because in the month after the STEP of August 11 the Private sector placements in dollars fell almost 30%, from USD 32,499 million to USD 23,017 million on September 9.

While, Bank of America Merrill Lynch He pointed out that "currently, Argentina's bonds have a very likely default price"and, in that scenario, he plotted different projections of recovery of the funds invested.

"Given the concerns of investors, we provide tools to estimate the potential value of debt recovery of the Argentine government in foreign currency under different scenarios, "said the report of the US institution.

"Our focus is on the available cash flows for debt service after excluding debt service with the IMF and other multilaterals. It is very useful to analyze the impact of the IMF debt payments, the primary surplus and other macroeconomic assumptions in the recovery, "he said.

For example, for a range of yields between 9% and 10% per year in dollars and a primary surplus in the medium term close to the IMF target for 2020 – between 0.75% and 1% of GDP – Bank of America Merrill Lynch foresees " values ​​of 30% to 49% recovery for debt issued in foreign currency ".

"We show the sensitivity of the recovery value to different growth assumptions, primary surplus, market access, IMF amortization schedule, real exchange rate, and so on. Only one 0.25% increase in primary surplus regarding the medium term GDP raises the recovery by USD 10"for every 100 dollars invested, he said." If the Government recovers the Market access in seven years, the recovery would improve around 5 dollars"he added.

Along the same lines, a report of JP Morgan He pointed out that "Argentina's debt markets have been assessing a high probability of a default / restructuring since the opposition's great victory in the recent primary elections."

For example, JP Morgan emphasized that Credit Default Swap (insurance against sovereign default) was extended to 2,700 basis points in the last month after the PASO for issues of Argentine public securities issued under foreign legislation, which are those on which global investment funds focus.

JP Morgan warned that those Argentine bonds are now listed at around 40% of its nominal value "after higher monetary weakness, capital flight and decrease in reinvestments in short-term debt securities in recent days, "such as Treasury Bills.

This explained, according to JP Morgan, why "the Government announced a forced reperfilation of the maturities of the Treasury Bills to short term (Letes, Lecaps, Lecer and Lelink) for institutional investors and expressed their desire to participate in a 'voluntary' reperfilation of bonds (medium and long term) with external and local legislation".

"Given the next elections On October 27, any discussion of debt with Argentine and foreign law will probably have to wait until a new government is established, while short-term Treasury bonds already extended their maturities by presidential decree, "the US bank said.

The restructuring approach of the debt delineated by both Merrill Lynch and JP Morgan is given in a context of falling economic activity in Argentina, which raised the 90% debt / GDP ratio, with an estimate of gross public debt of about 310,000 million of dollars.

Also, the devaluation of the Argentine peso too raise this ratio, since 81% of the sovereign debt is issued in foreign currency. For JP Morgan, a new rise of dollar, at 70 pesos in the wholesale price for the end of the year, it would increase the level of 95% sovereign debt of GDP.

He said that "uncertainty about future policy changes, given the historical experience of default below above? los los 的 anteriores bajo 的 anteriores anteriores los 的 anteriores anteriores anteriores 的 los anteriores 的. los los los los los los los losा losा losाा bajoा losा losा los losा los losा los losा los losा los losा los losा los los losा los losा los losा los losा los losา losร los losร los bajoร bajo losร los bajo losรร losร losรร losร bajo losรรร bajoร bajoรรรรรรรรรรรรร ​​losร losรรıร bajoร los los los los los losा 的 anterioresร losร losรรร losรร bajoร losรร losร losรร bajoร Peronist governmentsprobably weighed on the investor concerns", while he considered that" the IMF participation in financing and determining its maturities also will be key".

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