The nation was a default pariah, locked in a seemingly endless battle with hard-nosed hedge funds that rejected the terms of a debt restructuring – and wanted to be paid in full.
But new President Mauricio Macri came to power, insisted on reaching a deal with the nation’s holdout creditors, and paved the way for Argentina’s return to the international markets.
The result was a landmark US$16.5bn bond.
“The Argentina trade is never going to be replicated,” said Dennis Eisele, head of EM syndicate at Deutsche Bank, a joint global coordinator with HSBC, JP Morgan and Santander.
Even after Macri made it clear he wanted a deal with the holdouts, the assumption was that Argentina would pay them off wholly or partly in bonds – securities that were expected to come with hefty coupons.
But Macri’s finance team took a different tack, betting on Wall Street’s advice that it could raise US$10bn or more from international investors at much lower costs.
That was far from a foregone conclusion for a country still in technical default, and one facing significant legal challenges in the US courts.
“Everything needed to take place with a perfect seamless execution in order to have a successful offer,” said Katia Bouazza, HSBC’s co-head of global banking for Latin America.
The process also involved an unusual dual-stage settlement mechanism to ensure that a pari passu injunction handed down by the courts was lifted by paying the holdouts first.
Argentina set off on a five-day roadshow to market a deal comprising three, five, 10 and 30-year tranches in an effort to appeal to the broadest audience possible.
Many investors vowed they would never buy a 10-year from Argentina for less than 8%. But yet again, the sovereign defied expectations.
Not only did it secure a 7.5% yield on that tenor, but it generated a truly remarkable US$69bn of demand for the entire deal from over 800 accounts.
That book still stands as the largest in emerging markets history, even surpassing the US$67bn in demand seen on Saudi Arabia’s US$17.5bn bond in October – the deal that broke Argentina’s record for largest EM deal ever.
And the deal helped re-establish Argentina on the international stage as a nation open for business.
“This was a huge step forward in terms of the confidence of investors to continue to put money into the country,” said Sergio Lew, head of US credit markets at Santander.