Argentina holders grant consents to amend four series of Brady bonds

By Angela McDaniels

Tacoma, Wash., Jan. 10 - The Republic of Argentina said the holders of four series of its Brady bonds voted to approve some amendments to the collateral pledge agreements entered into in connection with the issuance of the bonds.

A meeting was held on Jan. 7 for the holders of Argentina's dollar-collateralized fixed-rate bonds due 2023 (dollar par series L) and dollar-collateralized floating-rate bonds due 2023 (dollar discount series L).

A meeting was held on Jan. 10 for the holders of its Deutsche mark collateralized fixed-rate bonds due 2023 (Deutsche mark par series) and Deutsche mark collateralized floating-rate bonds due 2023 (Deutsche mark discount series).

In the case of the Deutsche mark Brady bonds, the amendments will also change the meeting and amendment provisions to reflect the adoption in 2009 of the German bondholder Act.

The amendments remain conditioned on the affirmation by the U.S. Court of Appeals for the Second Circuit of the District Court's order dated Oct. 29 and the vacatur of the stay of the District Court's order dated Oct. 29 permitting the proposed amendments, neither of which has yet occurred.

The consent solicitation was held in connection with an exchange offer for the bonds.

By tendering Brady bonds in the offer, holders authorized the information, exchange and tabulation agent to vote on their behalf in favor of the proposed amendments; appoint Wilmington Trust FSB, the custodian, as their agent to receive and hold in trust the cash proceeds resulting from the liquidation of the collateral securing the principal of their tendered Brady bonds; agree to the liquidation procedures described in the prospectus; and waive all rights to any collateral securing payment of the interest on their Brady bonds.

Exchange offer

As previously reported, the republic's preliminary results showed that it received tenders for the equivalent of $267,201,297.33 principal amount of bonds during the offer, which began Dec. 6 and expired on Dec. 30.

Argentina calculated that it received:

• $151,123,000 principal amount, or 81.67%, of its $185,047,000 of the outstanding dollar par series L bonds;

• $69,766,000 principal amount, or 89.56%, of its $77.9 million of outstanding dollar discount series L bonds;

• €32,152,589.95 principal amount, or 69.27%, of its €46,417,633 of outstanding Deutsche mark par series bonds; and

• €4,642,530.28 principal amount, or 59.85%, of its €7,756,298 of outstanding Deutsche mark discount series bonds.

All of the tendered bonds were accepted.

Argentina said it made the offer in order to restructure and cancel the Brady bonds, to release the republic from any related claims and to terminate legal proceedings against Argentina in respect of the tendered Brady bonds.

Holders who tendered will receive a combination of new securities, the principal amount of which will vary depending on the series of Brady bonds tendered, plus a cash payment.

The new securities are dollar-denominated discount bonds due Dec. 31, 2033, dollar-denominated 8¾% global bonds due 2017 and dollar-denominated GDP-linked securities expiring no later than Dec. 15, 2035.

The cash payment will be made in dollars for dollar Brady bonds and partly in euros and partly in dollars for Deutsche mark Brady bonds.

Argentina did not set any limit on the amount of securities to be issued in the exchange or the amount of cash payments that it will make.

The discount bonds, global bonds and GDP-linked securities issued in the offer will be governed by New York law and will have the same economic terms as the corresponding dollar-denominated discount bonds due Dec. 31, 2033, dollar-denominated 8¾% global bonds due 2017 and dollar-denominated GDP-linked securities expiring no later than Dec. 15, 2035 issued by Argentina in June and September as part of the exchange offer it began in April 2010.

However, Argentina said it cannot assure holders that the discount bonds and global bonds issued in the offer will be fungible for trading purposes with the securities issued in the earlier exchange offer because this will depend on the trading prices of the bonds on their issuance dates.

Exchange amounts

Specifically, holders who tendered dollar Brady bonds will receive the following:

• An original principal amount of discount bonds equal to the product of the Brady residual amount of the Brady bonds tendered times 0.337, with this principal amount adjusted for capitalized interest.

The Brady residual amount will be equal to (x) the outstanding principal amount of the Brady bonds exchanged minus (y) the portion of the cash proceeds of the liquidation of the Brady collateral that is attributable to those tendered Brady bonds minus (z) the interest accrued on those Brady bonds on or after Dec. 31, 2001, as to which the holders of the Brady bonds of that series received payment from the liquidation of the collateral securing this interest;

• A principal amount of global bonds equal to the product of (x) the original principal amount of discount bonds received in exchange for the tendered Brady bonds times (y) 0.2907576, which represents the interest that would have been paid on those discount bonds during the period from Dec. 31, 2003 to but excluding Dec. 31, 2009 if those discount bonds had been issued and accrued interest from Dec. 31, 2003 up to but excluding Dec. 31, 2009;

• A notional amount of GDP-linked securities equal to the Brady residual amount of the Brady bonds tendered; and

• A cash payment in dollars equal to (a) the portion of the cash proceeds that is attributable to the Brady bonds tendered plus (b) the interest that would have accrued between Dec. 31, 2009 and Dec. 31 had the discount bonds received in the offer been outstanding at that time plus (c) the interest that would have accrued between June 2 and Dec. 2 had the global bonds received in the offer been outstanding at that time minus (c) an exchange fee of $0.004 per $1.00 of Brady residual amount of the Brady bonds tendered.

Holders who tendered Deutsche mark Brady bonds will receive a combination of new securities and cash meant to approximate the amount of securities and cash they would have if they had participated in the April 2010 exchange offer, sold their 2010 discount bonds and euro-denominated 2010 GDP-linked securities received in the earlier offer and used the proceeds to purchase discount bonds and dollar-denominated GDP-linked securities and if they had received a cash payment (1) in euro representing the total of (x) the cash proceeds attributable to their tendered Deutsche mark Brady bonds plus (y) the accrued interest on the original principal amount of euro-denominated 2010 discount bonds they would have received minus (z) the exchange fee and (2) in dollars with respect to accrued interest on the global bonds they receive in the exchange offer.

In total, the republic expects to issue $28,954,735 principal amount of the discount bonds, $8,502,875 of the global bonds and $86,329,073 of the GDP-linked securities.

It expects the total cash payment to be $166,603,924.22, consisting of $133,407,457.84 in respect of cash proceeds of Brady collateral securing the dollar Brady bonds, €23,672,729.31 consisting of cash proceeds of Brady collateral securing the Deutsche mark Brady bonds and $1,908,487.31 and €211,224.18, as applicable, consisting of cash payments to be funded by Argentina.

These preliminary calculations were made assuming that the cash proceeds would be calculated using interest rates and swap rates determined as of Dec. 28. The actual cash proceeds will be calculated using interest rates and swap rates at the time of liquidation of the relevant Brady collateral.

The settlement date is expected to be Jan. 27 for the dollar Brady bonds and Feb. 14 for the Deutsche mark Brady bonds.

The exchange offer was made to bondholders in the United States under a prospectus filed with the Securities and Exchange Commission and to bondholders in Argentina, Luxembourg, Germany and Italy under a separate prospectus.

The information, exchange and tabulation agent is Bondholder Communications Group LLC (212 809-2663 in New York, +44 0 20 7382 4580 in London, 0800 180 2501 in Germany and 800 789 917 in Italy). Copies of the invitation materials can also be found at bondcom.com/argentina.

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