Argentina to offer holdouts Par and Discount bonds - report

BUENOS AIRES, March 27 Wed Mar 27, 2013 7:43am EDT

BUENOS AIRES, March 27 (Reuters) - Argentina plans to offer holders of defaulted debt a Par bond for up to about $450 million and a Discount bond for the rest of the $1.33 billion the "holdouts" are demanding in court, a local newspaper reported on Wednesday.

Earlier this month, a U.S. appeals court ordered Argentina to provide "precise" terms for any alternative payment formula it would commit to that would resolve litigation with creditors seeking to be paid in full on bonds in default since 2002.

The government of the South American country, which has said it cannot offer these "holdouts" more than what was received by bondholders who entered debt swaps in 2005 and 2010, has until Friday to submit a formula and a timetable for carrying it out.

Wednesday's report in financial daily Ambito Financiero said the government's offer would propose giving the holdouts Par bonds equal to the original value of the debt when it went into default at the height of a 2001/02 economic crisis.

The newspaper, which did not say where it got the information, said that would be equivalent to about $450 million in 2038 Par bonds.

Holdouts would be offered Discount bonds -- which carry a steep haircut -- in exchange for the remaining $880 million they are demanding.

In the 2010 swap, the terms of which Argentina says it cannot improve for the holdouts, a Discount bond maturing in 2033 and representing 33.7 percent of the face value of the defaulted debt was offered to institutional investors.

Par bonds for the full face value were also offered in the exchange three years ago but only to small-scale investors wanting to tender a maximum of $50,000 or 40,000 euros in bonds.

Investors are closely watching the case, which is led by Elliott Management affiliate NML Capital Ltd and Aurelius Capital Management, because it has raised fears of a default on the restructured debt that was issued during the debt swaps.

Fears of default surged after U.S. judge Thomas Griesa ordered Argentina in November to pay into escrow the full $1.33 billion owed to the holdouts, an order Argentina immediately appealed.

Griesa's payment order followed his February 2012 ruling, upheld on appeal, which found Argentina violated the equal treatment provision in the bond contract known as pari passu. His order is meant to block any payment to exchange bondholders if full payment is not also given to the holdouts.

Argentina has said it cannot abide by the court order to pay the holdouts in full, meaning a rejection of the payment proposal it submits this week would increase the chances for a default on the $24 billion worth of restructured bonds.

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