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Argentina Scrambles To Raise $10 Billion, Avoid Reserve Collapse; BONARs Bidless

Tyler Durden's picture




 

A few days ago, in the aftermath of Argentina's shocking devaluation announcement, we showed the one most important chart for the future of that country's economy: the correlation between the value of the Arg Peso and the amount of Central Bank foreign reserves, both crashing. And as we predicted when we, before anyone else, started our countdown of Argentina's reserves, once the number hits zero it's game over for the Latin American country. Or rather, game over again, considering the number of times in the past Argentina has defaulted. Unfortunately over the past week, things for the Central Bank have gone from bad to worse and were capped overnight with the following headline:

  • ARGENTINE CENTRAL BANK SAYS RESERVES FELL $170M TO 28.1B TODAY

And this is what Argentina's reserve depletion looks like:

To summarize: Argentina has now burned through $2 billion in less than two weeks, the fastest outflow since 2006, and a trend which if sustained (and we see no reason why it would change), means it has just over half a year left of reserves projecting a linear decline. However, since the lower the amount of reserves, the faster the withdrawals will come, it is safe to predict that the endgame for Argentina will come far sooner, just as its suddenly crashing bonds seem to have realized.

Which is perhaps why, as Argentina's La Nacion reports, the country is suddenly, and long overdue, scrambling to raise $10 billion to "counter the flight of capital" from the country.

 Alas, it just may be too late.

According to the website, Argentina's economy minister Axel Kicillof secretly approached international banks, the same one he has been criticizing over the past months, with a simple request: please give me $10 billion. Alas, considering the country's track record of "honoring" its debt repayment promises, not even promising the required interest rate of +? will do much to generate interest in this particular offer banks can not refuse. Or, rather, can and will.

From La Nacion, Google translated:

Nacion reporters say that the meeting was held in strictest confidence, just in the days before major upheaval in the exchange market. When asked about it, the Economy Ministry spokesman did not confirm nor denied the information, in ABA did not respond to calls from this newspaper.

 

It is imperative for Argentina to get the dollars that can counter the flight of capital, which in January alone cost the Central Bank (BCRA) U.S. $ 2.499 billion of its reserves. It was the biggest drop since 2006, when the country repaid its entire debt of more than U.S. $ 9 billion to the International Monetary Fund (IMF).

 

The minister confided bankers requesting leave to look for dollars abroad, either by issuing new debt or through commercial credit lines that banks could get. Some entities, according to sources consulted by the NATION, and would have set to work to organize a tour to Kicillof investment to New York this month.

In other words, Argentina will be meeting Goldman shortly. So, in the aftermath of the Denmark Dong affair, we can probably expect another government "overhaul" in a few months, mediated by everyone's favorite vampire squid who is about to make Argentina an offer it can't refuse. Or maybe even Goldman won't touch this any more:

The order of Kicillof, noted the sources, was debated this week between ABA bankers. Although they pledged to work in private they also recognized that it will be difficult in the current context for Argentina to access fresh funding at a reasonable rate of interest and, especially, in the amounts the Government needs, somewhere around U.S. $ 10,000 million.

It gets worse:

In addition, they assert, although the Government intends to solve their conflicts with the Paris Club and Repsol, the devaluation of 18.6% recorded in January, the highest in the last 12 years, quite complicated negotiations, and that sowed new doubts about the ability to repay debt Argentina.

Yes, well, losing 20% of your investment "gains" overnight due to an arbitrary decision by the government does kinda make one want to invest in said government for a bit to quite a bit. As for the inflationary panic that has already gripped the country, and which we already commented on, well - it's only just begun.

Still, all of the above is largely expected, and was perfectly predictable by anyone not caught up in overconsumption of hopium pills, or having their head stuck in the sand of denial. The one thing we did learn is something which will soon make the front pages of all serious media publications around the globe.

After sharp declines in recent weeks, a sovereign dollar bond Bonar 17 yielded 16.2% yesterday.... Several weeks ago Kicillof announced his intentions to return to the debt markets. The National Social Security Administration (Anses) began in early January to sell their bonds in the market Bonar 18 to contain the escalation of the "dollar bag" on one hand, but also to begin to make a curve in the medium term rates.

Curious what the BONAR is?  Courtesy of this handy glossary of Argentine financial terms and acronyms, we now know that it is the formal name of an Argentina dollar-denominated bond issued under domestic law. Or, as in the case of Greece, precisely the instrument that will quite soon be crammed down due to non-existent covenant protection for creditors.

In other words, in a worst case for Argentina scenario, watch as hundreds of millions of BONARs suddenly deflate to nothing in a bidless market.

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Sat, 02/01/2014 - 18:22 | 4391958 Motorhead
Motorhead's picture

Chile, Chile...!

Sat, 02/01/2014 - 18:33 | 4391985 TruthInSunshine
TruthInSunshine's picture

Brazil will take it directly in its ass in the NOT-too-distant future.

Dominoes is on like Donkey Kong.

Sat, 02/01/2014 - 18:56 | 4392015 knukles
knukles's picture

Progressives Forward

 

beats getting buggered by Woody Allen

http://kristof.blogs.nytimes.com/2014/02/01/an-open-letter-from-dylan-fa...

Sat, 02/01/2014 - 19:05 | 4392084 ACP
ACP's picture

I just can't believe no one wants Christina's BONAR.

Sat, 02/01/2014 - 19:06 | 4392087 InjectTheVenom
InjectTheVenom's picture

Bitcoin anybody  ? ?

Sat, 02/01/2014 - 19:09 | 4392096 InjectTheVenom
InjectTheVenom's picture

hey is that a worthless BONAR in your pocked or are you just happy to see me ?!

Sat, 02/01/2014 - 19:13 | 4392100 Looney
Looney's picture

... BONARs - bidless

Bohner (and Pelosi) - dickless  ;-)

Looney

Sat, 02/01/2014 - 19:48 | 4392178 chumbawamba
chumbawamba's picture

I came here so I could see the chick with the titties.  Where the hell is the picture of the chick with the titties?

-Chumblez.

Sat, 02/01/2014 - 20:20 | 4392255 Scarlett
Scarlett's picture

TruthInSunshine:  "Brazil will take it directly in its ass in the NOT-too-distant future."

 

Perhaps, but only temporarily.  The real story isn't in fiat paper, but in energy.  They have offshore oil, good EROEI ethanol--and we spand more oil heating our homes than they spend **for everything**.

You may be right, but the game will shift afterwards.

 

Chumba look and you shall find --> http://lh5.ggpht.com/_Ta44vaZ1Msk/SwQHpC7UcyI/AAAAAAAAD5I/fm9yIUIwph0/A%...

Sat, 02/01/2014 - 21:26 | 4392389 WayBehind
WayBehind's picture

Argentina should nationalize Lionel Messi (and every other good Argentinian player) and rent him for few billions a month to Chelsea or one of those Russian oligarch owned soccer teams ... problem solved.

Sat, 02/01/2014 - 21:58 | 4392462 TruthInSunshine
TruthInSunshine's picture

Scarlet, I like Brazilians very much, and this isn't a wish, but my opinion of where current economic events leave Brazil; their offshore oil deposits are a long term storehouse of wealth (that is really only net-positive to extract if oil were priced much higher than currently, being extraordinarily deep under the deep layer of rock that is located under ocean) rather than an immediate source of assets to tap and liquify in order to offset their current crisis born of MASSIVE DEBT/CREDIT expansion.

They do have an efficient sugar cane-to-ethanol processing & refining sector, but it's not of a large enough scale economically to pay down their quickly spoiling shadow debt.

Brazil has a looming date with its debt legacy born of massive misallocation of investment during the "hot money" beta chasing BRIC boom years.

Sat, 02/01/2014 - 22:27 | 4392563 DanDaley
DanDaley's picture

Like Jim Rogers says, commodity based economies, like Brazil, eventually have major problems.

Sat, 02/01/2014 - 23:25 | 4392730 Soul Glow
Soul Glow's picture

Argentina has the hottest women in the world.  It is no wonder how many times they have defaulted.

Sun, 02/02/2014 - 15:09 | 4393762 samcontrol
samcontrol's picture

this top ten is fairly real, and i hit three of them.

Sat, 02/01/2014 - 22:30 | 4392569 Scarlett
Scarlett's picture

I agree on all that; I just happen to think that domino falls but returns quite well after some years.  But what do I know; they could be heading Venezuela with those people in power.

Sat, 02/01/2014 - 23:43 | 4392763 Soul Glow
Soul Glow's picture

Everyone needs to remember the Fed buys USTs putting cash into the PDs hands.  When the Fed is not putting as much cash into PD hands, they can't distribute as much.  In the end, the bonds of States like Argentina go bidless.

Sun, 02/02/2014 - 01:26 | 4392944 Jack Burton
Jack Burton's picture

Indeed!  Fed dollars drive the world, and we are watching more than one currency heading for the shitter.

Sun, 02/02/2014 - 01:50 | 4392983 Freddie
Freddie's picture

+1

Brazil's deep water oil  is years away and as you said is deep under the sea.  Good post.

As far as Argentina - this is what 70 + years or Peronism socialism leads to.  Endless corruption, defaults and more.  Argentina is like the Detroit of South America.  Very attractive people, talented, in a resource rich land of abundant food.  It is pretty sickening that any people could mismanage their affairs so badly.  Kirschner reminds me of Pelosi. Argentina is like a country Pelosi would run into the ground while robbing the people blind.

Sun, 02/02/2014 - 15:22 | 4393808 Crash Overide
Crash Overide's picture

But I thought the World Cup profit generation machine will save Brazil no?

Sat, 02/01/2014 - 22:18 | 4392531 akak
akak's picture

Obviously inflationary.

Sat, 02/01/2014 - 23:39 | 4392757 Soul Glow
Soul Glow's picture

Bullish for South Korean plastic surgeons.

Sat, 02/01/2014 - 20:42 | 4392309 Al Gorerhythm
Al Gorerhythm's picture

I thought you subscribed to Zh only for the articles.

Sat, 02/01/2014 - 20:59 | 4392339 SolarSystem1932
SolarSystem1932's picture

I found her.

Look at properties of the image.

(Requires knowledge of the RIGHT mouse button)

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014...

Now google "Argentina fans"

And there she is!!!!

NICE & Perky!

Enjoy

http://www.google.com/imgres?sa=X&biw=1280&bih=814&tbm=isch&tbnid=cU4JkS...

Sat, 02/01/2014 - 22:16 | 4392527 TruthInSunshine
TruthInSunshine's picture

Must be nippy out.

Sun, 02/02/2014 - 12:11 | 4393413 Flakmeister
Flakmeister's picture

Nah, Maradona was in the house...

She was just happy to see him...

Sun, 02/02/2014 - 15:26 | 4393816 Crash Overide
Crash Overide's picture

"I found her."

It's like something straight out of The Chive...

Sun, 02/02/2014 - 00:49 | 4392893 willwork4food
willwork4food's picture

 

"I came here so I could see the chick with the titties." 

What, are you horney and want your financial information served naked?

Mon, 02/03/2014 - 00:54 | 4394947 TheReplacement
TheReplacement's picture

Next on CNBC... gotta get ratings up!

But I really do like the idea.  I would probably watch certain hours.

Sun, 02/02/2014 - 00:45 | 4392889 willwork4food
willwork4food's picture

I just knew this post would devolve into an X rated triage

Sat, 02/01/2014 - 19:19 | 4392110 JonNadler
JonNadler's picture

Cristina says: Si les gustan sus BONARS, puden quedarse con sus BONARS. Hey, funsiono para el idiota ese en el norte no?

Y saben donde de pueden meter sus BONARS? 

Sat, 02/01/2014 - 20:03 | 4392118 fonzannoon
fonzannoon's picture

A country is scrambling to raise half of one fine  that JPM farted at? Funny

Sat, 02/01/2014 - 19:31 | 4392139 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

Can SAKS buy DONG with BONAR ?

Sat, 02/01/2014 - 19:47 | 4392176 remain calm
remain calm's picture

Banar or Boner whats the difference, both are going to leave you fucked.

Sat, 02/01/2014 - 19:21 | 4392116 Tim_
Tim_'s picture

Woody Allen (born Allen Stewart Konigsberg) is a jew.

Sat, 02/01/2014 - 19:48 | 4392175 Global Hunter
Global Hunter's picture

Rex Grossman is not a Jew (neither was OJ Simpson).

Sat, 02/01/2014 - 21:28 | 4392397 A Nanny Moose
A Nanny Moose's picture

Roman Polanksi?

Sun, 02/02/2014 - 00:12 | 4392688 Tim_
Tim_'s picture

Roman Polanski (born Rajmund Roman Thierry Polanski) is another jewish rapist.

Sat, 02/01/2014 - 23:07 | 4392682 Tim_
Sat, 02/01/2014 - 19:00 | 4392069 Stuck on Zero
Stuck on Zero's picture

Obama's solution goes something like this:  If we all go communist together there won't be anyplace for people to run to and no currencies to trade in to.

 

Sat, 02/01/2014 - 19:11 | 4392097 knukles
knukles's picture

A New World Order founded upon the Chaos wrought by the Cloward Piven Strategy

 

Starting to make sense to ya' now, huh?

Sat, 02/01/2014 - 19:17 | 4392112 jon dough
jon dough's picture

Chaos...the other red meat...

Sun, 02/02/2014 - 02:36 | 4393013 Vendetta
Vendetta's picture

"If we all go communist together" ->  If we all go fascist together        There, fixed it for ya

Sat, 02/01/2014 - 19:07 | 4392088 whatsinaname
whatsinaname's picture

I predict more Yen will be sold to bail out the Args !!

Sat, 02/01/2014 - 19:28 | 4392131 eurogold
eurogold's picture

The question is ....will christina bail out before the crash ( so she can come back and save Argentina again, or will she stay for the crash to be hung from a lamppost ?

Sat, 02/01/2014 - 18:23 | 4391959 Motorhead
Motorhead's picture

Way to go, Argentinians.  Ya gonna re-elect Frau Kirchner?

Sat, 02/01/2014 - 18:57 | 4392059 El Oregonian
El Oregonian's picture

Frau Kirchner? Man, she'd make my BONAR deflate also...

Sat, 02/01/2014 - 18:59 | 4392065 nmewn
nmewn's picture

Heh...there's nothing worse than a bidless BONAR!

Sat, 02/01/2014 - 22:40 | 4392607 StychoKiller
StychoKiller's picture

As I get older, it gets more difficult to inflate my BONAR!

Sat, 02/01/2014 - 18:26 | 4391963 The Shootist
The Shootist's picture

BenYellen shit 10 billion a day. Maybe they can find it under the mattress.

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