May 20, 2010 / 12:15 AM / 7 years ago

UPDATE 2-Argentina says bond swap early acceptance at 45 pct

4 Min Read

* More than $8.5 billion in bonds have entered swap

* Gov't continues to woo small investors in Italy, Germany

* New $1 billion global issue ruled out for now (Recasts with 45 percent participation in phase targeting large investors, adds earlier stock comments, deadline, byline)

By Guido Nejamkis and Helen Popper

BUENOS AIRES, May 19 (Reuters) - Argentina's offer to swap up to $18.3 billion in defaulted debt has attracted participation of 45 percent after a first phase targeting large investors, Economy Minister Amado Boudou said on Wednesday.

He said the country would achieve its goal for acceptance of 60 percent if investors entered another $3 billion in bonds before the June 7 deadline, but he ruled out issuing a new bond at the moment due to global market turbulence.

"Our objective remains 60 percent. We haven't raised that to any other number because we don't see this offer as being a gift," said Boudou, who has just returned from a road show in Italy, home to many smaller holders of defaulted Argentine bonds.

Turbulent market conditions due to the euro zone debt crisis mean it is not the right time to continue with plans to raise $1 billion in fresh funds with Argentina's first global bond sale in more than eight years, Boudou said.

"If we return to the market today it will be at a rate we're not happy with," he told reporters.

Argentina has been locked out of global markets ever since its devastating economic crisis and $100 billion default in 2002. With the swap it hopes to repair its reputation with investors and be able to raise new funds.

Boudou said that so far more than $8.5 billion in bonds have been tendered by investors, who will receive new bonds at a 66.3 percent discount along with compensation for some back interest.

He said all the major institutional investors had tendered their paper and set a floor for retail investors' acceptance at $2 billion, which would bring the government close to its participation target.

In 2005, three years after its historic default, Argentina restructured its debt, forcing investors to take steep losses. But about a quarter of bondholders rejected the harsh terms and many of those sued Argentina trying to recover their full investment.

While some investors might continue legal battles, many are seen entering the exchange, seeing it as their only option after holding for almost 10 years bonds that don't pay any interest and trade at way below their face value.

"Those that have more than $100,000 and ... aren't involved in legal action against Argentina, have all entered. None of the big bondholders have decided not to take part," Boudou said.

He said government officials will continue in the next two weeks to woo investors in Italy and Germany to enter the swap.

The head of an Italian bondholders' group told Reuters earlier on Wednesday Italians holding some $4.3 billion in Argentine debt are weighing whether to swap their paper, but that many will probably not decide until the last minute. [ID:N19238115]

Nicola Stock's Task Force Argentina has said the country's current swap offer is worse than the 2005 restructuring that was rejected by his members.

Although Argentine government spending is rising in a pre-election year, analysts say the country does not need to raise debt on international markets to meet debt obligations that soar to an estimated $15 billion this year. (With additional reporting by Kevin Gray, Juliana Castilla and Karina Grazina; Editing by Gary Hill) (helen.popper@thomsonreuters.com; +54 11 4318 0655; Reuters Messaging: helen.popper.reuters.com@reuters.net))

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