UPDATE 2-Argentina to offer debt under foreign law in bond swap-source

Fri Aug 30, 2013 4:11pm EDT

By Alejandro Lifschitz and Guido Nejamkis
    BUENOS AIRES, Aug 30 (Reuters) - Argentina will offer bonds
governed by foreign law as part of its upcoming swap of
defaulted debt, a government source with direct knowledge of the
situation told Reuters on Friday.
    The government this week announced plans to open a third
bond exchange as part of its effort to clean up non-paying debt
left in the market after Argentina's 2002 sovereign default. 
    More than 90 percent of the almost $100 billion in debt that
Argentina defaulted on in 2002 was swapped for new securities in
2005 and 2010 bond exchanges. 
    "It will be exactly like the offer (in 2010)," said the
high-placed government source who was not authorized to speak
publicly about the matter and asked to be anonymous. "The offer
will be the same."
    The bonds are governed by U.S., British and Argentine law.
The source said the government will try to be "flexible" in
allowing holders to swap various bonds under various
jurisdictions.
    The country has so far avoided a new debt crisis, thanks to
the restraint of judges who last week issued a stay order
delaying implementation of a decision pending review by the U.S.
Supreme Court.  
    Argentina lost an appeal of a U.S. court order requiring it
to pay $1.33 billion to holdout investors who had refused to
accept the reduction in terms offered by the government's
restructured paper.
    The government is appealing the ruling and, in a separate
debt swap plan, trying to exchange foreign debt for bonds
governed by Argentinian rather than U.S. law. This swap could
help the government avert a new default by protecting payments
on restructured debt from the ruling in New York.
    
 
     
    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 had agreed
to restructurings.
    If Argentina refuses to pay holdouts despite a standing
order, courts could block payment of creditors who participated
in the country's 2005 and 2010 debt restructurings.
    That would throw some $28 billion of foreign debt into
technical default, triggering Argentina's second debt crisis in
a little over a decade and undermining a recovery in South
America's third-biggest economy. 
    The government's effort at avoiding a fresh default could
drag on for another year or more as it fights the holdouts to
the bitter end in U.S. courts, and simultaneously looks to
side-step any final ruling ordering it to pay up.
    Swapping into debt governed by Argentine law is one of a
dwindling list of options for the government to avoid a default
while sticking to its promise of not paying the holdouts the 100
cents on the dollar that they are demanding.

http://www.reuters.com/article/2013/08/30/argentina-debt-idUSL2N0GV1LU20130830