Monday, April 18, 2016


Lots and lots of rain.  So much rain the Soy crop is in danger to the tune of about $2 billion.  That may be good news here in the fly-over zone because we grow a lot of soy beans.  We also grow corn...too much corn so maybe Farmer Brown will switch to soy beans this year.  Oh, at least where we are the weather has been perfect and the planting has begun.

It's also raining money ON Argentina.  Remember I mentioned that there were reports about the Argie bond issue being oversubscribed?  That was confirmed late today by the WSJ, but without a number being mentioned.  Interested?  Well, you might recall that the initial amount indicated was $12.5 billion with the thought that if things go really well the amount could be increased to $15 billion in four tranches to include a 30 year tranch.  Might happen.  I have it from a quite reliable source that the order book now stands at fully four times the size of the issue!  For those who failed multiplication that is sixty billion dollars for a single-B credit with a somewhat checkered repayment history.  Coupon for the 30 year is indicated at 8.85% but with this sort of demand that is certainly subject to change.

Congrats all around to the Argies and certainly to the underwriters for this extraordinary effort.  I thought they would get it done--with ease if I may nowconfess--but I am forced to admit I am gob-smacked by this result.  Remarkable.

To be honest, the most important thing to me is what the documentation is going to look like.  Certainly there will be a "collective action clause" whereby everything in the original terms can be changed by a majority  (to be determined) vote of the bond holders which would of course negate the issues that led to the mess in the first place, but I wonder if the Argies will go for broke and demand that the indentures be governed by Argentine law or at the very least be subjuct to the jurisdiction of Argentine Courts.  Wouldn't put it past them as they are clearly now in the driver's seat given the demand out there.  There are also a couple of other little jewels they could try to insert but let's just wait to see how this stage of the proceedings plays out.  I might simply point out that even with the minimum mentioned above, bond holders will have little if any protection whatsoever.  Then again it is not love that conquers's greed, and a lot of fund managers just might make their numbers for the first half with enough of an 8.85% coupon.  Who would have thunk it.  When it rains it pours.

Back to the real world for a while.

No comments:

Post a Comment