Argentina's $1.5 billion sovereign bond issue, which came to market in October supported by a $250 million policy-based guarantee provided by the World Bank, has won the prestigious International Financial Review's 1999 Awards for Sovereign Bond and Latin American Bond of the Year. The bond was also named one of the 'Deals of the Year' by Institutional Investor Magazine, and won the Investment Dealers' Digest award for Emerging Markets Bond of the Year.
IFR, a leading financial market journal, cited Argentina's issue for having enabled the country to raise $1.2 billion on the U.S. dollar bond market after having been shut out of it for six months. Its success, the IFR Review of the Year said, "was all the more impressive in view of the subdued market into which it was launched."
"For braving these conditions, and for employing such an innovative structure, the Republic of Argentina's multi-tranche, zero-coupon issue wins both Sovereign Bond and Latin American Bond of the Year," the IFR concluded. Institutional Investor, meanwhile, quoted former Argentine finance official Miguel Kiguel, saying, "It was a difficult market, but investors liked that we gave them something different."
The bond's success hinged on the first-ever application of the World Bank's policy-based guarantee instrument, approved by the Bank's Executive Board in April. Argentina, facing constrained access to bond markets, elections and the uncertainty of Y2K, approached the Bank in early August. A round of negotiations followed, involving the Bank's Argentina team, led by director Myrna Alexander, the Guarantee and Project Finance department headed by Nina Shapiro, the Operations Policy and Strategy Group directed by Joanne Salop, and the Bank's legal staff. On August 16, the $250 million guarantee was approved by the Bank's Executive Board.
"The synergy of different parts of the Bank working together quickly was key to the success of this operation," said Paul Levy, the Bank's lead economist for Argentina, and task manager for the deal.
"It was a good strategic use of the instrument, as it helped Argentina get access in a difficult market," said Nina Shapiro. "We're gratified that Argentina was pleased and that it was so well-received in the market."
The joint book-runners for the bond issue Goldman Sachs and J.P. Morgan pointed to the success of the transaction in the market, including pricing and effective access to a new group of institutional investors.
If Argentina was pleased with the arrangement, investors liked it too. "The cascading structure and World Bank guarantee gave the issue a lot of clout," said Gwen Sanger, of Principal Capital Management.
"The purpose of the guarantee," said the World Bank's Levy, "was to re-open the market for Argentina, so as to assure continuity of the country's sound macroeconomic policies, and ensure that vital social services were sustained during a period of economic and political transition."
The book-runners, who organized a whirlwind 16-city roadshow for the bond issue across the U.S. and Europe, in which Bank staff participated, noted that the Bank's guarantee attracted high-grade investors and was critical in prompting the rating agencies to give all of the bond's six tranches investment grade.