betting on a turn around
The sell-off in Argentina bonds is so severe that it may soon attract distressed-debt investors betting that there’s money to be made in a restructuring.
With overseas notes trading at about 38 cents on the dollar, the vulture funds are probably still a ways from swooping in. Shops including Morgan Stanley and Merian Global Investors expect buyers with a strong appetite for risk will emerge at about 30 cents.
The market will go lower and distressed investors will step in at some point, even with the uncertainty,” said Alain Nydegger, a money manager at Pala Assets in Switzerland, which focuses on emerging-market debt.
Bonds may fall to the low 30-cents level before catching a bid, Morgan Stanley strategists led by James Lord wrote in a report Tuesday.
Nydegger said that at 30 cents on the dollar the bonds start to look appealing, but some distressed funds would likely start adding at 35 cents. He said he would start buying at between 25 and 30 cents, figuring he’d make a profit with a 50% haircut if negotiations take three years.
similarities with nmx
emerging market debt. looks like it actually . lithium is an emerging market . Argentina’s
(nmx)?? valuations are “certainly starting to look more attractive,” even as investors search for clarity, said Graham Stock, a senior emerging-market sovereign strategist at BlueBay Asset Management in London. “At these kind of levels, I think not just
distressed, (calgary) but
dedicated investors (mick) are going to start to look at adding positions again.”
An investor who purchases equity shares of a company instead of debt could make more money than debt investors if a company turns itself around. But, shares could lose their entire value if a company goes bankrupt. Debt, on the other hand, still retains some value even if a turnaround doesn’t happen.