Argentine Finance Minister Luis Caputo charged with fraud over 100-year bond issuance
Argentine Federal Prosecutor Juan Pedro Zoni charged Finance Minister Luis Caputo on Tuesday with fraud related to the June 19 issuance of a 100-year bond.
The charges were pursuant to a complaint presented by 13 congressmen belonging to the opposition, center-left Front for the Victory; the case was accepted, and remanded to Federal Judge Ariel Lijo.
The issuance in question was unprecedented in Argentine history: a public bond with a 100-year term and an interest rate of 7.125%.
The $2.75 billion in principal, according to economist Alfredo Zaiat, will raise around $2.5 billion in capital due to a 10% market discount - which hikes the yield to 8% (nearly twice the emerging market average). The issuance will be amortized over 14 years; but cost public coffers nearly $17 billion in interest for the remaining 86 years.
The bonds, moreover, were issued with a trigger clause that would make the Argentine government liable for nearly $9 billion in payouts should a buy back be ordered in the near future.
Contrary to its fiscally conservative image, the 18 month-old Macri administration has come under fire for raising Argentina's national debt from $240 billion to $300 billion - and its public foreign debt (the most difficult to finance) from $85 billion to $150 billion.
Macri's issuance of $100 billion in dollar-denominated bonds with an average yield of around 8% has been particularly controversial, being that they were issued under New York law, with no pari passu or collective action clauses to guard against vulture fund extortion, and with the nation's mineral resources as collateral.
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