Argentina Taking Debt Spree to Europe With Benchmark Sale

(Bloomberg) -- Argentina picked three banks to pitch an offering of at least 500 million euros ($562 million) of bonds to European investors in what would be its first euro-denominated offering in six years.

Banco Bilbao Vizcaya Argentaria SA, BNP Paribas SA and Credit Suisse Group AG will arrange meetings in London, Germany, Netherlands and Milan next week. A benchmark-sized, euro-denominated bond sale in two tranches may follow subject to market conditions, according to a person familiar with the deal, who asked not to be identified because the information is private. The sale would be the country’s third international bond sale of 2016 and the first euro-denominated issue since a debt restructuring offer in 2010.

Argentina has sold more debt than any other developing nation this year, placing about $20 billion in dollar-denominated bonds to investors lured by a reform-driven government that scrapped most currency controls and reached a milestone settlement that pulled the country out if its 15-year sovereign default. A $16.5 billion sale in April was the biggest ever from a developing nation and was met with $70 billion worth of offers from international investors, a record at the time. Government authorities had previously said they didn’t intend to sell more debt in international markets this year.

“There is probably a lot of demand among euro-based investors given low yields on emerging-market sovereigns in euros,” said Richard Segal, a senior analyst at Manulife Asset Management in London. Argentina’s “story is improving," he said, citing public support of structural reforms to the economy and recovering foreign investment.

Euro-denominated sovereign bonds in developing nations currently yield 1.6 percent on average, compared with 4.69 percent on equivalent dollar debt, according to Bank of America Merrill Lynch indexes. The yield on Argentina’s euro-denominated discount bonds due 2033 fell to 6.69 percent from 7.05 percent on Wednesday.

“There’s a lot of interest from European investors to invest in Argentina’s bonds again,” Finance Minister Alfonso Prat-Gay told reporters in Buenos Aires. “We want there to be European instruments to channel investment from that part of the world, and that’s what we’re working toward in the next few days.”

The bond sale will only be available to European investors, according to a government official close to the deal who asked not to be identified because the matter is private. The sale is unrelated to an offer released yesterday that expands the eligibility of defaulted German-law bonds for a settlement offer, the person added.

Other Argentine issuers have sought to benefit from falling yields in European currencies. YPF SA, the country’s biggest oil company, issued 300 million Swiss francs ($307 million) of 3.75 percent bonds on Sept. 16, its first sale in that currency.

"For Argentina there will be lots of opportunities for arbitrage like this," Miguel Angel Gutierrez, YPF chairman, said Tuesday during an interview at Bloomberg’s headquarters in New York. "We are witnessing a lot of interest in the country. You will see more opportunities like the one in Swiss francs in other currencies."

--With assistance from Daniel Cancel

To contact the reporters on this story:
Lyubov Pronina in London at lpronina@bloomberg.net
Carolina Millan in Buenos Aires at cmillanronch@bloomberg.net

To contact the editors responsible for this story:
Daliah Merzaban at dmerzaban@bloomberg.net
Chris Vellacott, Brendan Walsh