market folly

We're posting up notes from the Ira Sohn Conference.  Redwood Capital's Jonathan Kolatch gave a presentation on going long Argentina sovereign debt.  He manages $4 billion, mainly distressed and high yield.

Argentina Sovereign Debt: Debt/GDP 44.5%, half or less than most in Europe. Fiscal balance, growing GDP, 8.9% in 2011, 4.2% in 2012. Similar to Brazil, Mexico, Colombia however, yet trades 13% yields vs 4.2% average for others. Defaulted in 2001, debt ratio improving ever since as GDP grows. Only paying 0.8% of annual GDP in interest to non-governmental holders of Argentine debt, so they have little to gain by defaulting.

Says the YPF nationalization doesn't mean they'll default on the debt. But they are still technically in default. If traded in line with peers: 36.5% IRR, get 13% yield while you wait. Downside: recovery around 20% at worse- Greece, Russia, others 40-50%. Last Argentine default was 35%. No catalysts, cheap, 13.7% yield while you wait.


P.S. - Don't miss other presentations from David Einhorn, John Paulson, Bill Ackman & more: notes from Ira Sohn Conference 2012.