Bankers celebrate as Cavallo buys a little time

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Bankers celebrate as Cavallo buys a little time

Argentina's $29.5 billion sovereign debt exchange deal was a great coup for the banks lead-managing it. Liability management deals are making up for a slowdown in the emerging-market debt business. How much it helped Argentina is less clear. Investors participated for technical reasons, not out of faith that the economy is improving.

       

Executing a multi-billion debt deal is always a daunting prospect, but when a country's entire economic survival plan depends on it, the exercise can be hair-raising, as the seven lead-managers of Argentina's voluntary debt exchange discovered in June.


If the bankers needed any more motivation to make every call, to consider every technical twist to make the deal work, they might have considered that the near-term prospects of the business in which they work - emerging-debt capital markets - also depended on the outcome.


The $29.5 billion deal, undertaken by CSFB and JPMorgan, was a tremendous success in its structure and execution. It achieved its prime objective of giving Argentine economy minister Domingo Cavallo some breathing space to concentrate on economic reform by staving off a meltdown in the sovereign's bonds and an imminent liquidity crisis.


The deal was bigger than the $20 billion originally expected, and eventually involved replacing $29.5




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