BUENOS AIRES: Many investors are interested in swapping global Argentine bonds for paper governed by local law, the government said yesterday, a day after the Senate approved the proposed debt exchange as a way to circumvent US court rulings.
Argentina defaulted in July after the New York court that governs some of its original bond contracts blocked a coupon payment. The proposed swap into local law bonds is Argentina’s way of trying to get around the US courts. If the swap fails and Argentina stays in default, it would be another blow to Latin America’s No. 3 economy as it contends with high inflation and recession.
“There is obviously willingness among many creditors, or bondholders, to participate in the sovereign debt payment law, in order to get the money that is owed to them,” cabinet chief Jorge Capitanich told reporters.
Argentina’s debt saga started with its 2002 default on about $100bn in bonds. Most holders got less than 30 cents on the dollar in two subsequent restructurings, while a small group of hedge funds went to court for full repayment.
The debt swap bill, passed by the Senate on Thursday and expected to become law later this month, would allow holders of $29bn in bonds under foreign law to swap them for paper governed by Argentine law. This would defy a US court ruling that says Argentina is prohibited from paying holders of its restructured bonds without also paying the hedge funds $1.3bn plus interest. It was this decision that set the stage for the July default. Argentina steadfastly refuses to pay the holdouts, saying that to do so would open the country to a raft of new lawsuits.
Argentina, in need of financing to develop its vast Patagonian shale oil and gas fields, will be unable to issue fresh international debt until the lawsuits are settled.
Capitanich’s optimistic take on the debt swap differed from that of investors familiar with talks held in New York this week between Finance Secretary Pablo Lopez and fund managers.
“They probably wanted to know whether we would participate in a swap with local law (bonds), but they didn’t ask the question directly. I pre-empted it by saying we wouldn’t,” one fund manager who met with Lopez said.
REUTERS
