Alternative Latin Investor
As part of Debtwire Latin America Plus’ partnership with Alternative Latin Investor, our journalists will be contributing articles for each issue. For the June/ July 202 edition Debtwire journalists Katherine Wegert and Clara Agustoni took a look at the current Argentine bond market and what it could mean for the rest of 2012.
Argentine corporate bond liquidity dries up as regulatory, refinancing risks rise
By Katherine Wegert in New York and Clara Agustoni in Buenos Aires
Secondary market liquidity for Argentine corporate bonds has dried to a trickle amidst President Cristina Kirchner’s increasingly interventionist stance in local economic affairs. From all accounts, the remainder of 2012 promises to be a difficult year for Argentina, with a wave of corporate defaults expected in 2013, several sources said.
The European financial crisis predictably weighed heavily on all Latin American assets, but those from Argentina consistently underperformed the rest of the region. Trading volumes of Brazilian and Venezuelan corporate bonds, for example, slumped 50% and 40% over the same period. According to data from the Emerging Market Traders Association (EMTA), however, Argentine corporate bond trading dropped from nearly USD 5.4bn in 4Q10 to USD 1.5bn in 4Q11, down 72% year-on-year.
That trend shows no sign of abating this year. Reflecting the lack of liquidity, the bid-ask spreads on several Argentine corporates remains unusually wide, even for highly-respected credits like candy maker Arcor. The company’s USD 200m 7.25% bond due in 2017 was recently quoted at 105.84/107.96 bid/ask, a far cry from the tighter 1/2 point spread seen last year. Other, more liquid, benchmarks like IMPSA’s USD 390m 10.325% 2020s are trading over two points wide, double where they were last year.