UPDATE 1-Argentina to make debt offer to Paris Club - source

Mon Jan 20, 2014 7:55am EST

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PARIS Jan 20 (Reuters) - Argentina will make an offer to members of the Paris Club on Monday to renegotiate the terms of its outstanding debt owed to the group of creditor nations, an Argentine source said.

Argentina is trying to revive long-stalled talks with the Paris Club on renegotiating the terms of the some $9.5 billion debt it still owes club members. Paris Club members Germany and Japan between them hold 60 percent of the debt.

With Buenos Ares showing signs it is willing to cooperate, Paris Club members have been eager to get a concrete proposal for the debt to be repaid over a reasonable period of time, which would have to be determined in negotiations.

"We will make an offer," the Argentine source told Reuters ahead a meeting between the delegation led by Economy Minister Axel Kicillof with Paris Club officials in the French capital.

The Paris Club wants to be reimbursed in full in order to avoid creating a precedent for other countries that owe its members money.

Argentina wants a breakthrough with the Paris Club because it has been shut out of capital markets since its massive 2002 default and needs to open up new sources of international funding.

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Comments (1)
GermanHoldout wrote:
President Kirchner, please end this HORROR-default!

Argentina should solve not only the Paris Club but also the Holdout Problem!

Argentina’s nightmare default, this since 2002 ongoing HORROR must finally have an end!

We, the holdouts, have been suffering for more than a decade!!!

Since 2002, Argentina has not paid a cent to the holdouts!

Beyond the U.S. Hedge Funds there are still tens of thousands retail Holdouts worldwide, most of them from Italy and Germany.

Most of the Holdouts are “before default buyer”, who have bought their bonds at an average of 100% or even higher.

President Kirchner (by the way a beautiful women) should solve the holdout problem!

President Obama and the IMF should help and talk to President Kirchner to end Argentina’s Horror-Default.

A reconciliation with the holdouts would improve Argentina’s ratings, initiate a firework of investments and also cheaper credits for argentine companies.

Argentina clearly has the capacity to repay the debt to the holdouts after more than a decade! The outstanding debt is only approximately 12 Billion. (incl. accrued interest) It is not much for the 3. largest economy in South America.

If Argentina and the holdouts made NOW A BINDING AGREEMENT with respect to the “time after” (end of the “Rights Upon Future Offers (RUFO) clause in December 2014), seizure risks and a technical Default would be immediately averted. Argentina could immediately return to the capital market and thus Argentina could refinance the payments to the holdouts, without using reserves.

Holdouts want a simple, clear, secure and an ACCEPTABLE solution.

Holdouts DO NOT want such exotic financial constructs, as they were the swap conditions in 2005 and 2010, with an exorbitant Haircut, with many new bonds, with only Discount bonds above $50000, GDP Warrants etc.,and with maturities in the eternity. Such “shares like” financial constructs are inacceptable.

A swap from the defaulted old bonds to new bonds are unacceptable also for tax reasons. In Germany, for example, we would have to pay for new bonds 30% tax separately. That would mean an additionally haircut of approximately 30%.

Following simple conditions might be acceptable for the Holdouts on the basis of the old bonds . (without swapping from old to new bonds, also because of tax reason)

- at the latest, on 01/01/2015 (end of RUFO clause) Argentina should repay in CASH 100% of the nominal value of the defaulted bonds, which became due before 2015.

- for the accrued interest between 2002-2015´Argentina should emit new bonds with 50% discount, and with a maturity of 5 years.

Jan 20, 2014 1:15pm EST  --  Report as abuse
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