Tango bond, a budget: who won with the restructuring? – The Republic

MILAN – Argentina has signed a definitive agreement to repay detenetori Tango bonds that have not adhered to the two restructuring proposals of titles over the years Two thousand, as a result of the default of Buenos Aires. Involved 50 thousand Italian investors, who will receive 150% of the nominal value of bonds in their portfolio: by the end of June will be credited $ 1.35 billion. Now, fifteen years away from bursting of the facts, the question that arises is: who has made the best choice? Those, the majority, who adhered to the restructuring proposed by Baires or those who went all the way to the international cause? We put the question all’Aiaf – Italian Association of Financial Analysts and consultants – and the answer is twofold. On the one hand, calculator in hand, they were right those who have not joined, in a simulation-schools have popped up an annual gross yield of around 3% (in the light of recent developments). But you have to take into account the subjective variable of the risk incurred in these years, and for the private is a key parameter, and by time to get to a solution.

Here’s the answer edited by Fulvia Risso , Financial Analyst and Associate Aiaf.

and ‘possible to say who gained or lost more for less? No and yes. It ‘difficult to draw a clear line between winners and losers in a lasting saga over fifteen years. For two reasons. Argentina in the affair the starting point to say if it was better to wait for the actual reimbursement or accede to the restructuring are the swap of 2005 and the “clone” of 2010, exchanges consist of different types of fruit securities of a real financial engineering It makes it difficult to uniquely determine the yield. Moreover, time has a value from the financial point of view can be quantified but only under certain circumstances.

Having said this you can try to do the math. Accepting the exchange of 2005, instead of the “old” Tango bond, investors received three different types of bonds:

1. Par bonds with maturity 31/12/2038 with coupon flow in area 3% that allowed the conversion of the old credit with a ratio of one to one, so without cutting the nominal value but distributed only to a small percentage of the old credit;
2. Discount securities 31.12.2033 due date when it was converted the rest of the credit, coupon in area 8% but with a haircut (cut nominal value of about 70%), which were delivered between 25 and 35 cents par value;
3. GDP titles without capital but with coupons linked to the performance of the Argentine economy.

Taking into account the reinvestment of coupons and failing to report the accounts, who joined in 2005 with a dollar again has today held a dollar , ie its initial capital with a gross yield essentially nil. has neither lost nor gained.
Always under the same assumptions of simplifications, who has joined the reopening of the swap of 2010 has somewhat ‘now in the portfolio less dollar invested in the old tango bonds as he lost five years of interests.
who joined the repayment of 2016 that ended the Argentine default will receive, always simplifying accounts, about one dollar and 50 cents for each dollar invested in the old tango bonds, with an annual gross yield of around 3%.

So you would say that “won” – measurement – those who have decided not to join the restructuring. However, you must consider another feature, very important in making investment decisions, especially for private investors. The value of a certain return than an expected return. This element of subjectivity in financial mathematics can be translated with the degree of risk aversion of each subject, which models the slope of the utility curve. Accession to the restructuring gave precisely a certain return, today’s reimbursement was unthinkable six months ago.

The inability to deal with those who had not joined the two swap was enshrined in law Argentina until a month ago. The unexpected turnabout in this affair came with the new government, led by President Mauricio Macri, who unexpectedly won the presidential elections in December, which in four months has brought Buenos Aires to have access to the international capital market. And with record numbers. Fifteen years after the biggest default in history in emerging countries, with nearly 100 billion dollars involved, Buenos Aires ended a few days ago a placement of government bonds by 16.5 billion dollars, compared to a question that has reached $ 70 billion. This is the issue the amount highest ever conducted by an emerging country.

Which one will you back Argentina’s trusty is twofold. A technique mainly: it is still unclear if the securities issued will enter into JPMorgan indexes, reference for those investing in emerging countries. The inclusion would mean a strong demand for these securities from around the inverse of investors tied more or less closely to the benchmark, with a likely positive effect on prices. A wide-ranging: the markets are giving confidence to the new Argentine government, with President reformist Macri that has already implemented a series of measures to bring the country to sustainable growth, with the removal of capital controls and the closing of litigation International that prevented to Argentina to finance itself on the market for international capital for years.

When working on the numbers emerges not such a clear division between winners and losers, which depends on the subjective value that gives the time and risk . From this it has solved in four months a dispute along fifteen years certainly come out winners instead the president Macri and Argentina that can return to finance itself on the capital market.

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Argentina

tango bonds

AIAF

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