April 19, 2016 / 10:12 PM / in a year

Argentina returns to global debt markets after 15-years

Argentina's Finance Minister Alfonso Prat-Gay arrives for a news conference in Buenos Aires, Argentina, February 29, 2016. REUTERS/Marcos Brindicci

BUENOS AIRES (Reuters) - Marking a rare bright spot among gloomy emerging markets, Argentina sold $16.5 billion of sovereign debt on Tuesday in its first international bond issue since its record 2002 default.

Most proceeds from the auction, which was four times oversubscribed, will go to finally settling Argentina’s messy legal dispute with investors over unpaid debt that emerged from the $100 billion default that plunged millions of middle class Argentines into poverty.

New President Mauricio Macri hopes closing that painful chapter in the country’s history will bring down borrowing costs across Latin America’s third largest economy and attract the investment needed to kickstart growth.

Investors seemed convinced of his strategy on Tuesday. Argentina received offers worth $68.6 billion from investors around the world, two third of them based in the United States, Finance Minister Alfonso Prat-Gay said late on Tuesday.

“We could even have issued twice as many bonds,” Prat-Gay told a news conference in Buenos Aires. “On Friday, when we receive the funds in our account, we will pay the $9.3 billion owed to holdouts.”

Argentina managed to sell the bonds at yields at the lower end of its price guidance due to the strong interest.

It sold $2.75 billion worth of 3-year notes at 6.25 percent, $4.5 billion of 5-year bills at 6.87 percent, $6.5 billion of 10-year bonds at 7.5 percent and $2.75 billion of 30-year bonds at 7.62 percent.

“Argentina is a grab-fest out there,” one New York-based investor told Thomson Reuters publication IFR earlier in the day.

Macri, a free markets champion, won the Argentine presidency last year on promises of opening and restarting the stagnant economy. He argued settling with the “holdout” creditors from an earlier debt restructuring and ending Argentina’s status as a markets pariah was key.

That was a major contrast with his predecessor as president, Cristina Fernandez, who refused to negotiate with hedge funds that rejected the country’s 2005 and 2010 restructurings which offered about 30 cents on the dollar.

The funds sued in the U.S. courts for full repayment of the defaulted Argentine bonds they still hold. Fernandez called them “vultures” for picking on the carcass of the Argentine economy.

“The fact that a government with only four months in power has solved this issue, which had been pending for more than a decade, is a major success for Macri,” said Ignacio Labaqui, who analyzes Argentina for consultancy Medley Global Advisors.

Better access to financing is expected to help Macri carry out his open-market policy reforms without the severe spending cuts that have gotten previous Argentine leader thrown out of office.

Additional reporting by Gabriel Burin, Brad Haynes and Jorge Otaola; editing by Meredith Mazzilli

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