What bond markets can learn from Argentina

Author: | Published: 1 Apr 2005

Argentina has completed the largest and most complex sovereign bond restructuring in history. Before the debt exchange, it owed about $82 billion in principal and $20 billion in past due interest. Hundreds of thousands of creditors held 150 kinds of defaulted instruments issued in six currencies under the laws of eight jurisdictions. Creditors owed just over 76% of the total, or $62 billion, got $35 billion in new performing bonds. Other performing debt includes $40 billion in domestic and about $30 billion in multi-lateral obligations. Argentina left behind almost $25 billion in defaulted principal and interest.

The morning after the tender, newspaper editorials around the world heralded a new era for sovereign debt, for the emerging markets and, occasionally, for international finance. Their views on what the Argentina deal means were as disparate as they were definitive. Some said the exchange would close the markets to middle-income countries. To others, it reaffirmed the markets' resilience. Some...