FT: Argentina proposes voluntary debt swap

20/8/2014

By Benedict Mander

Argentina’s President Cristina Fernández announced plans on Tuesday to launch a voluntary debt swap aimed at dodging a US court ruling that last month triggered the country’s second default in less than 13 years.

The government is seeking approval from congress for plans that would enable it to service debt in Argentina as well as allow bondholders to exchange their debt issued under foreign law for bonds of the same value governed by local law.

Ms Fernández said Argentina would stop using Bank of New York Mellon as a trustee and instead make payments on its bonds via an account at Banco de la Nación in Buenos Aires, after the default was caused by a US judge preventing BNY Mellon from transferring $539m to bondholders.

The US Supreme Court upheld the judge’s ruling that Argentina must pay its so-called holdout creditors in full at the same time as paying the rest of its bondholders, who accepted a 65 per cent haircut on their bonds after a 2001 default.

The announcement put an end to speculation that a deal might be reached with the holdouts, after negotiations with the government collapsed at the end of July. Subsequently, a group of Wall Street banks were understood to be negotiating to buy the holdouts’ defaulted debt at a discount and sell it to the government later.

The swap will be voluntary and the government will also deposit funds for the holdouts in a show of “good faith” under the terms of the 2010 debt restructuring, Ms Fernández said.

“If I were to sign what many would like me to sign, no doubt some would applaud this, but the bomb would explode later,” Ms Fernández said, referring to the government’s failure to reach an agreement with the holdouts, which it had warned could trigger serious legal liabilities.

“I have little time left as president, so this is not for this government but for the next one,” she added in a pre-recorded speech aired on nationwide television at 9pm on Tuesday evening.

On the verge of tears, admitting that she was “nervous”, Ms Fernández urged opposition politicians to back the bill she was sending to congress.

The president said Argentina’s debt was accumulated by previous governments and that her predecessor and late husband, Néstor Kirchner, was the first president to start reducing the national debt after decades of increasing indebtedness.

Her announcement raised many unanswered questions over what would happen if bondholders chose not to swap their debt for local-law bonds, or if they refused to accept Banco de la Nación as a fiduciary agent.

Πηγή

Σχετικές δημοσιεύσεις εδώ κι εδώ.