WEST PALM BEACH, FL (www.hedgeco.net) – Hedge funds have begun bargain hunting in the huge Argentina\u00c3\u00af\u00c2\u00bf\u00c2\u00bds record debt swap, according to news reports. About $102.6 billion in such debt are being offeredas swaps for new bonds. Carlos Hourbeigt, Portfolio Manager at Argentina-based hedge fund Copernico Capital Partners, said, “The Argentine peso bond seems to be offering the last free lunch in anemerging markets (bond) market that is surely not cheap.” About 40 percent of Italy\u00c3\u00af\u00c2\u00bf\u00c2\u00bds retail investors have already sold their bonds, Hourbeigt said.<\/p>\n
Hourbeigt also said that holders of the Argentine\u00c3\u00af\u00c2\u00bf\u00c2\u00bds dollar as well as euro denominated bonds could exchange such holdings for Argentine peso, and the deal is set to expire on February 25. Hourbeigt added, \u00c3\u00af\u00c2\u00bf\u00c2\u00bdIn a U.S. dollar diversification era, Argentina offers a remarkable opportunity to invest in one of the most undervalued currencies in the world…The hedge fund community is buying aggressively euro-denominated bonds to exchange for the new (Argentine peso) bonds.”<\/p>\n
Many hedge funds are participating in the trades as well, according to published reports, and prices have been under pressure as a result. One Milan-based asset manager said, “I think the funds will decide at the last minute what to do, whether to accept the offer, or hold on to the bonds.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd He added, \u00c3\u00af\u00c2\u00bf\u00c2\u00bdThe prices are under pressure from retail investors who are selling instead of accepting the offer or suing.”<\/p>\n
Hedge funds may be participating in such debt swaps for the total return basis according to Richard Segal, director of research at emerging market broker Exotix. He said, “I think hedge funds are entering the restructuring process on a total return basis, rather than to litigate.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd Segal said, “Nevertheless, there are several dozen lawsuits pending, including one large claim for $724 million brought by investor Kenneth Dart in Sept 2003.”<\/p>\n
Paul Oranika
Editor-in-Chief
HedgeCo.Net
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