August 28, 2013 / 12:51 PM / in 4 years

UPDATE 4-Argentina has new bond swap plan: same terms, no end date

By Hugh Bronstein and Walter Bianchi
    BUENOS AIRES, Aug 28 (Reuters) - President Cristina
Fernandez on Wednesday proposed a new bond swap offer aimed at
"holdout" creditors who have refused to settle with Argentina
over its record $100 billion default in 2002, differing in one
way from prior deals: it is open-ended.
    By dropping the expiration date for the offer, Fernandez
says the bill she submitted to Congress on Wednesday shows
Argentina's goodwill before U.S. courts who have criticized the
country's hardline treatment of dissident bondholders.
    U.S. judges have complained that Argentina's prior two
restructurings, in 2005 and 2010, included "lock laws" shutting
out creditors who didn't accept a steep discount on their bonds
within months. 
    On Friday, Argentina lost an appeal of a U.S. court order
requiring it to pay $1.33 billion to the holdouts. Fernandez is
appealing the ruling and also trying to swap foreign debt for
bonds governed by Argentine rather than U.S. law. 
    The swap for Argentine bonds would protect payments on
restructured debt from the ruling in New York - evidence that
Argentina is as defiant as ever, dissident bondholders argued in
a Wednesday court filing to the U.S. Supreme Court.
    "It makes a mockery of Argentina's assurance to the Second
Circuit ... that it was not 'devising schemes to evade the
injunctions,'" wrote lawyers for a group of the holdouts, asking
the high court not to take up the case.
    The dissident bondholders led by NML Capital Ltd, a unit of
Paul Singer's Elliott Management Corp, are demanding full
payment on the defaulted debt. They have argued that Argentina
cannot deny them their due while paying investors who agreed to
    But the 93 percent of bondholders who renegotiated debts,
accepting less than 30 cents on the dollar, now worry that
Argentina's refusal to pay holdouts in the face of court orders
could freeze payments on restructured bonds as well.
    The new, open-ended bond-swap would offer holdouts the same
terms as the 2010 swap. With Argentina's Congress controlled by
lawmakers allied with two-term president Fernandez, the bill is
expected to pass.
    Argentina has so far avoided a new debt crisis thanks to the
restraint of judges who last week issued a stay order delaying
implementation of their decision pending review by the U.S.
Supreme Court, which could take months. 
    In a direct plea to the U.S. Supreme Court, Fernandez on
Monday urged justices to overturn Friday's ruling by the New
York-based 2nd U.S. Circuit Court of Appeals, which ordered her
government to pay the holdouts.
    Paying the holdouts 100 cents on the dollar would undermine
future sovereign debt restructurings, the president argued.
    Economy Minister Hernan Lorenzino told a Senate hearing on
Wednesday that the government's latest measures are meant to
ensure it can keep paying holders of restructured debt while
coaxing the holdouts to accept the same terms.
    "This is a concrete proposal that not only affirms that
Argentina is willing to pay, but will continue to be willing to
pay," Lorenzino said.
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