NEW YORK, Sept 4 (IFR) - Argentina's plan to emerge from its
second default in 13 years by swapping defaulted debt for new
local-law bonds is receiving a cold reception in New York, where
officials from the country's finance ministry are meeting with
"It was an exchange of views," one fund manager who met with
Argentina's Finance Secretary Pablo Lopez this week told IFR on
"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."
The proposed exchange, which aims to bring Argentina's debt
out of the reach of US courts, was approved by Argentina's
Senate on Thursday and will be debated by the lower chamber next
But implementation faces a number of legal hurdles, as any
third party assisting the country in carrying out the exchange
risks being held in contempt of the US court.
Robert Cohen, a lawyer for lead holdout creditor NML Capital
said during a conference call on Thursday that his firm will
promptly act against any attempt to carry out the exchange.
"We will take appropriate steps to make sure that the plan
is not implemented and that any third party who thinks it is
appropriate to participate in such an exchange realizes that
they might be held in contempt by doing so," said Cohen.
But even if technical and legal hurdles are eventually
cleared, some believe hedge funds and special situation
investors, who by now hold a significant portion of Argentina's
restructured bonds, lack the financial incentive to participate.
"I don't get it. If US investors wanted to swap into local
law they could do it today," said a second portfolio manager
scheduled to meet with Lopez this week. "There are billions of
local-law bonds outstanding."
But in spite of the slim chances of success, many investors
fear that the exchange is the only option Argentina currently
has on the table.
"I don't think they have the know-how and the attention span
to look beyond one option at the time. Right now, they are
exploring this option," said the first fund manager.
Plans initiated by a group of exchange bondholders to waive
the so-called RUFO clause, which until 2015 prevents Argentina
from offering holdouts better terms than those of its 2005 and
2010 restructurings, has so far received no traction from the
"Their concerns go beyond RUFO," said the first investor.
"They feel that the judicial chips are stacked against them. But
the feedback that they will go back to Buenos Aires with is that
there is very little appetite for a local law swap."
(Reporting by Davide Scigliuzzo; Editing by Paul Kilby and Marc