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Argentina clears the way for outstanding debt swap and new bonds issue
Mercopress
December 11, 2009

In the latest step to finish with outstanding debt problems and return to markets, the Argentine government officially allowed issues of new bonds to be swapped for defaulted government paper.

The new law, approved last month in Congress and published in the Official Gazette Thursday, reopens a 2005 debt restructuring and allows for a new offer to bondholders who rejected the steep discount in the previous swap.

Under the new law, the government cannot offer better terms than in the 2005 swap to the so-called holdouts.

In a separate announcement, the government said it could register with the US Securities and Exchange Commission to sell up to 15 billion US dollars in debt, but did not provide further details on potential sales.

Markets have been waiting for the law's publication because it is seen as the precursor to Argentine filings to securities regulators in the United States, Europe and Asia detailing the terms of the new offer to bondholders and other details.

The SEC may take up to 20 days to approve the terms of Argentina's debt swap, according to a statement by the country's Economy ministry.

Argentina defaulted on some 100 billion USD in debt during the 2001-02 economic and political crisis. In 2005 it restructured the debt, forcing investors to accept steep losses. About a quarter of bondholders rejected that offer, and some of them sued Argentina, trying to recover the full value of their bonds. The lawsuits have blocked Argentina from returning to global markets.

Facing tight financing next year, the administration of President Cristina Fernandez de Kirchner has decided to reopen the 2005 swap so it can resolve lawsuits and raise fresh funds.

Argentine debt obligations rise next year to13 billion USD. The government says it can comfortably meet all payments, but some economists have calculated that it needs to raise up to 7 billion USD to cover the payouts.

Bonds were slightly higher on Thursday, and the country's risk -- as measured by the spread between Argentine bonds and comparable US Treasuries in the J.P. Morgan Chase EMBI+ index11EMJ -- fell 19 basis points to 776 basis points.

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