Argentina's New Debt Offering Drawing Strong Demand

Argentina is receiving strong demand for its giant debt offering that could grow to $15 billion, attracting an array of investors looking for higher yields during a period of low interest rates.

The government is looking to raise at least $12.5 billion of debt in four tranches, with maturities ranging from three to 30 years, says Siobhan Morden, head of Latin America fixed-income strategy at Nomura.

But government officials have said they are prepared to sell as much as $15 billion if there is sufficient demand, according to investors who spoke with Argentine officials.

A dollar-denominated debt offering of that size would be the largest from a developing country in at least 20 years, according to Dealogic data.

Initial price talk suggests the 10-year tranche pricing with a yield of 8%, with the three-year at 6.75%, the 5-year at around 7.5% and the 30-year at 8.85%, Ms. Morden said. Other emerging market 10-year bonds that are single B issuers are trading at about 7.47%.

Ms. Morden said the strong demand could enable the government to lower those yields even if it raises the size of the bond offering.

The bonds could price as early as Monday, according to debt investors.

The global debt offering will be Argentina's first since defaulting in 2001, and the government plans to use proceeds to pay back holders of the country's defaulted debt. Argentina ended a 15-year dispute with bondholders when it agreed to settle in February with a group of U.S. hedge funds and other holdout creditors.

Ms. Morden said the recent emerging debt bond rally, and a growing risk appetite after the Federal Reserve said it was taking a cautious approach to raising interest rates, is helping drive demand for Argentine debt. The country's new bonds are rated B- by S&P and were recently upgraded to B3 by Moody's.

"It's been risk on in everything," she said. "Mexico is up, Colombia is up, everything has been rallying for three weeks now. This isn't any specific driver or any specific credit. With that stability, there is conviction that you should add to things that are high yield."

Deutsche Bank AG, HSBC Holdings PLC, J.P. Morgan Chase & Co. and Santander Group are the lead underwriters along with bookrunners Banco Bilbao Vizcaya Argentaria SA, UBS Group AG and Citigroup Inc.

Write to Julie Wernau at [e-mail]

(END) Dow Jones Newswires

April 18, 2016 14:45 ET (18:45 GMT)

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