Today, Kyle Bass, founder and principal of Hayman Capital Management, spoke at the iCIO Investment Summit in New York City. He spoke and took questions on a range of issues, and ValueWalk was there to take notes on the event.
Kyle Bass on ArgentinaArgentina is a pretty Interesting place to invest, but let’s look at what is wrong first. It has the largest sovereign default, and Paul Singer is still fighting it out. 25% inflation, capital controls etc., but maybe it’s time to start looking at is as a long. Rwanda, Nigeria Kyle Bass once invested in a mine there which was nationalized can all raise money for much lower cost than these countries. The European discounts have a 12% yield trading at 73 cents. The court case will could be settled and Paul Singer will win, but Kyle thinks Argentina actually has a really good chance of winning. Argentina pays debts in dollars and Euros and compared to neighbors Argentina is almost at the top. The investment thesis is that the credit risk is priced in too high. There is a capacity to pay and the government plans to pay – it’s only 1% of GDP, 6% of TA revenue – but their real problem is that inflation is much higher than they admit, which is partially due to oil imports. However, imports will switch around and be oil rich soon. The President is gone in 2015 and the top candidates are both pro business. Argentina has found the second-largest shale formation in the world and oil experts Kyle spoke to said it’s high quality and could get $100 billion in investments. Halliburton Company (HAL), Schlumberger Limited. (SLB) etc. are all sending teams now and balance of payments will improve over the long term. Sovereign debt is a great way to invest and once the Supreme Court case is over they will be able to access capital markets and then it is a new ballgame as elections come up. The price caps and capital controls are so rigid once they are removed right now everything is paid in cash – they should pay par and risk of default is really low, you want to own assets as these come under control.
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