| ARGENTINE GDP WARRANTS |
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| On January 14th 2005, Argentine president, Nestor Kirchner together with then economy minister Roberto Lavagna launched their proposed restructuring on the $103bn debt burden that the government had been in default on since late 2001. In paying back only 30 cents on the dollar and getting the majority of the 500,000 affected bondholders to accept the terms the deal has been deemed a success, certainly I know who I would have renegotiating my mortgage. However hidden deep in the 808 page restructuring document were the terms for a series of warrants linked to Argentina's GDP growth that were largely ignored by the market. Each bond had one warrant attached which the market initially valued at around 2 cents each. |
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| We have long since believed that these warrants may be one of the most undervalued instruments in the marketplace, and compounded by the confusion that the market has shown in its over zealous attempts to value them, we see the Argentine GDP warrants as one of the trades of 2006. |