Megaswap II: Sturzenegger's Revenge

[forest444]

Alfredo Zaiat, Página/12.

Through a "Decree of Necessity and Urgency" signed by President Mauricio Macri, the Argentine Central Bank will receive a series of National Treasury bonds paying 7.75% and 7.875% in return for nontransferable notes paying only 0.6% (both, denominated in dollars). The new bonds will then be sold to international banks, including HSBC, JP Morgan, Deutsche Bank, Citibank and Goldman Sachs.

The operation, led by Central Bank President Federico Sturzenegger and Finance Minister Alfonso Prat-Gay, includes a discount of 15% in principal and constitutes an additional debt service obligation of over $9.1 billion during the whole duration of the bonds (ranging from 6 to 11 years in maturity). Whereas the Treasury notes being relinquished are mostly for low-cost intra-public sector debt of a revolving nature, these new bonds are more costly (at 7.8% interest) and cannot easily be refinanced. Sturzenegger, moreover, has announced plans to use these bonds as potential collateral for at least $5 billion in further foreign borrowing.

This would be the second such megaswap for Sturzenegger, who is currently under indictment for having authored Argentina's infamous 2001 bond swap; the consequent increase in debt and interest helped result in the country's much-publicized collapse that December and opened the door to holdout lawsuits that affect Argentina to this day. As in the 2001 megaswap (which yielded $150 million in commissions), this transaction is expected to generate tens of millions in fees for the banks and individuals involved.

The initial Megaswap of $16.1 billion could, by Prat-Gay's own admission in the press conference, be followed by similar additional swaps for a total of up to $64.5 billion. The current megaswap would be in the form of three issues: Bonar 2022, at 7.75% ($4.5 billion, including the 15% discount); Bonar 2025, at 7.875% ($4.5 billion); and Bonar 2027, at 7.875% ($4.7 billion).

These bonds will thus require an estimated additional debt service of $9.1 billion compared to the Treasury notes being swapped: $2.0 billion additional in the case of Bonar 2022; $3.1 billion for Bonar 2025; and $4.0 billion for the Bonar 2027.

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Coming soon to a country near you. Rated R, for ripoff.

[Judi Lynn]

1. "Revenge" sounds like just the right word, doesn't it?

How on earth is it that Sturzenegger is still right in the middle of things, entrusted with vital matters? Sounds as if the fascists have been far more entrenched throughout than outsiders would ever be able to grasp.

That, in itself, makes the accomplishments of the Kirchners seem even brighter and braver than ever. They have had to get their work done surrounded by greedy, treacherous fascists determined to destroy them, right within their own country.

The numbers are shocking. What a shame Macri has thrown open the doors to this direct action which will not serve the people of the country at all.

[forest444]

2. Sturzenegger was definitely one of Macri's worst appointments, and a sign of where his loyalties lie

This is someone who refinanced Argentine debt (the 2001 bond megaswap) in such a way that it added at least $38 billion (25%) to the already massive foreign debt inherited from the Menem years.

The Megaswap helped lead to the country's scandalous collapse in December of that year, and of course opened the door to spurious holdout lawsuits that afflict Argentina to this day (effectively barring it from foreign credit, which as you know most countries depend on - including the U.S.). That alone represents major malfeasance in public office, to say nothing of the $150 million in commissions (at Argentina's expense) his mentor David Mulford and others made off the deal.

Having been given the chance, Scammernegger is naturally doing it again.