BUENOS AIRES (Reuters) - Argentina's Senate on Wednesday began debating a bill designed to sidestep U.S. court-rulings that led to the South American country's July debt default, including an amendment to add France as a jurisdiction for making bond payments.
President Cristina Fernandez wants to resume servicing sovereign bonds that were restructured after Argentina's previous default in 2001. The bill is her attempt at putting the country's debt out of reach of U.S. courts that have jurisdiction over some of Argentina's original bond contracts.
It was not immediately clear why France was proposed as a bond payment jurisdiction in addition to Argentina, a suggestion first put forward by a leading political opponent of Fernandez who is one of the early frontrunners in next year's Oct. 25 presidential vote.
"The possibility of paying under French law will be added (to the bill)," Pablo Gonzalez, a senator from the ruling Front for Victory coalition, told reporters.
The proposal is likely to enjoy smooth passage through a Congress dominated by political allies of Fernandez. She faces a far tougher time persuading investors to buy into the plan, which faces tough legal and logistical hurdles.
A Manhattan court has banned Argentina from making interest payments on restructured debt held under U.S. law until it settles with a group of hedge funds who rejected restructurings in 2005 and 2010 and are suing for full payment.
Those who agreed to the restructurings got less than 30 cents on the dollar while the "holdout" hedge funds sued for full repayment.
Traders taking part in an auction to settle Argentina's credit default swaps valued the country's restructured bonds at 39.5 cents to the dollar on Wednesday, in line with analyst expectations, Thomson Reuters' IFR reported.
U.S. District Judge Thomas Griesa ruled Argentina owed holdouts led by NML Capital Ltd and Aurelius Capital Management $1.3 billion plus interest - a sum the tough-talking Fernandez has steadfastly refused to pay.
Fernandez, who calls the funds "vultures," says that to abide by the court ruling would spark additional legal claims that would threaten to devastate Latin America's third-biggest economy.
Finance Secretary Pablo Lopez is in New York this week meeting with fund managers, several market sources told IFR.
"The idea seems to be that he will explain what they are trying to do with the new law and tell investors that they should go ahead with the exchange," one of the sources said.
If the measure passes the Senate it will head to the lower house of Congress for debate.