NEW YORK, Feb 9 (IFR) - Buenos Aires is aiming to get better pricing than the sovereign when it comes to market with a new bond in the days ahead, hoping to show it is a better credit than Argentina itself.
Two investors who met with city officials said Buenos Aires wants to price inside the sovereign's curve on a planned five-year non-call two bond to refinance debt maturing in April.
The city, rated Caa1/CCC-/CCC, is looking to raise US$500m plus to refinance an April maturity.
"The city has historically traded 200bp inside the sovereign because it is in much stronger financial health," one of the investors told IFR.
"If you assume a return to normal and a resolution with (Argentina's) holdout (creditors), then the city should probably return to that historical spread."
Argentina defaulted on some US$30bn of foreign law bonds last year, and has been locked in a bitter legal dispute with its disgruntled creditors.
But not everyone is convinced the city will be able to get a better result from investors who have been repeatedly burned in their Argentina dealings.
"We are very cautious about (the city's) liquidity constraints in these tough times," said the second investor.
"We would be looking at a premium over the sovereign, but (the city) thinks the other way around. They think they can price inside."
But with many participants expecting a more market-friendly administration to be elected in October, Argentina's bonds have rallied on an aggressive bid of late.
The new Buenos Aires bond will have a final maturity of six years but will amortize in equal installments over its last three years for an average life of five, one investor said.
Its 2017s were spotted Monday at a yield of around 8.7%, mid-market, while Argentina's Bonar 2017s were quoted at a slightly higher 8.9%, according to a broker in New York.
The city faces an April 6 maturity on its US$475m of 12.5% 2015s. Bank of America Merrill Lynch, HSBC and JP Morgan kicked off the roadshows last week in London and New York.
Meetings continue today in Boston and Los Angeles and will conclude in New York on Tuesday. (Reporting by Davide Scigliuzzo; Editing by Paul Kilby and Marc Carnegie)