22
November, 2012
Argentina's
bonds suffered one
of their largest single-day price drops on record today
as it appears ever more obvious that a re-default will occur.
With
Elliott still battling over holdouts from a prior life, it seems the
smart-money is long-gone this time leaving the momentum-chasing
yield-grabbing flow suddenly fully cognizant that the bonds are in
fact dead.
'Acceptance'
is upon us as we
wrote a month ago: "As
for the Argentina vs Elliott bare-knuckled match, enjoy it while you
can: very soon the Latin
American country will likely proceed with yet another round of
creeping selective defaults,
exchange offers, consent solicitations, and other debt
reorganizations, which will make the current free-for-all into a
total and epic labyrinth of creditors, interests, bondholder classes,
general unsecured claims, and other total confusion."
We
continued:
After all why bother with Argentina: there are far higher IRRs to be generated by shorting local-law Spanish bonds while buying their international-law cousins. In fact, courtesy of the current government's arrogance and naivete, the position can be put on in a cost, and carry, neutral basis. Then sit back and just wait for the spread to blow out.
Because
what is happening with Argentina today, is coming very soon to every
banana republic near you.
22
November, 2012
Technically, a technical default
may still be avoided, but it is now unlikely.
As the following presentation from JPM's Vladimir Werning shows, the market has already decided what the "next most likely big picture step" will be. The big question is what the less than big picture next steps will be. And as the following flow chart of options to all "potentially" impaired parties shows, there are quite a few possible steps as the variety of causal permutations has suddenly exploded. For everyone who has gotten sick and tired with following the sovereign default story of one Greece and Spain, please welcome... Argentina, where things are about to get a whole lot more interesting.
As the following presentation from JPM's Vladimir Werning shows, the market has already decided what the "next most likely big picture step" will be. The big question is what the less than big picture next steps will be. And as the following flow chart of options to all "potentially" impaired parties shows, there are quite a few possible steps as the variety of causal permutations has suddenly exploded. For everyone who has gotten sick and tired with following the sovereign default story of one Greece and Spain, please welcome... Argentina, where things are about to get a whole lot more interesting.
Next
steps: A nerve-wrecking December for bondholders on all sides.
Risk
of “technical default”: Where does it lie within the payment
chain and why?
Risk
of “technical default”: A payment chain is as strong as its
weakest link
Full
presentation:
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