Argentina has new bond swap plan: same terms, no end date
(Reuters) - President Cristina Fernandez on Wednesday proposed a new bond swap offer aimed at "holdout" creditors who have refused to settle withArgentina over its massive default of more than a decade ago that differs in just one way from prior deals: it is open-ended.
By eliminating an expiration date for the offer, under the bill Fernandez submitted to Congress on Wednesday, Argentina seeks to repair its strained relationship with U.S. courts critical of the government's management of fallout from Argentina's default on $100 billion of sovereign debt in 2002.
U.S. judges have complained that Argentina's prior two restructurings, in 2005 and 2010, included Lock Laws that offered only limited time windows for holders to exchange their bonds for new paper offering less attractive terms than the original defaulted debt.
Creditors holding 93 percent of the defaulted bonds accepted restructurings in 2005 and 2010 that give them less than 30 cents on the dollar. Holdout creditors have gone to the U.S. court to demand full repayments at 100 cents per dollar.
The 2005 and 2010 restructurings had offered bondholders only a matter of months to swap their bonds.
The new, open-ended bond-swap would again offer the holdouts 30 cents on the dollar. With Argentina's Congress controlled by lawmakers allied with two-term president Fernandez, the bill is expected to pass.
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 Argentina's restructured foreign debt for bonds to be governed by Argentine rather than U.S. law.
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 is likely to take months.
If Argentina does not get the ruling its wants from the Supreme Court and refuses to pay the holdouts in full, lower courts could block payment overseas to the bondholders who accepted restructurings in 2005 and 2010.
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 that ordered her government to pay the holdouts.
Paying the holdouts 100 cents on the dollar would, according to Fernandez, undermine future sovereign debt restructurings.
Fernandez insists her government is meeting its obligations and rejected one appeals court judge's description of Argentina as a "uniquely recalcitrant debtor."
The move to switch the restructured bonds for new paper governed by local law is aimed at protecting Argentina's treasury from the U.S. courts enforcing the laws under which the bonds were originally issued.
Economy Minister Hernan Lorenzino told a Senate hearing on Wednesday that with these measures the government is simply trying to ensure it can keep repaying 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.
(Additional reporting by Juliana Castilla; Writing by Hugh Bronstein; Editing by W Simon and Leslie Adler)