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Argentina Econ Min: To File Debt Swap Papers with SEC Friday
Market News International
January 19, 2010

BUENOS AIRES (MNI) - Argentine Economy Minister Amado Boudou said Tuesday the government Friday will make a new presentation to the U.S. Securities and Exchange Commission for a proposed $20 billion bond swap as it seeks to return to global financial markets for the first time since 2001.

The deal is "very much on track," Boudou said on Radio Mitre.

It "is advancing at full speed," he said, adding that he expects participation of 60% of the defaulted debt in the offer.

"Argentina can already obtain funds in the exterior, but the swap will make it so it can do it at much lower rates," he said. Argentina last borrowed funds from Venezuela at 15% and last year was offered 14% for a bond sale.

Boudou first announced the swap last October and has said it will be held as soon as this month and completed by February.

But a crisis with the central bank this month raised speculation of a delay as it soured investor confidence in the country.

Argentine President Cristina Fernandez de Kirchner fired Central Bank President Martin Redrado Jan. 7 after he refused to release $6.6 billion in reserves to help cover the $13 billion in debt service payments due this year. The government is creating a fund as a signal of its commitment and capacity to pay its debt.

Redrado subsequently won a court injunction to get his job back, sparking a political storm over the government's methods of trying to oust the top banker and create the Bicentennial Fund.

The situation worsened on Jan. 12 when U.S. District Court Judge Thomas Griesa froze at least $1.7 million in central bank funds in U.S. accounts at the request of holders of defaulted Argentine debt.

While the central bank got the freeze lifted Jan. 15, the episode has tarnished the already low confidence in Argentina's finances and set up fresh roadblocks in its efforts to settle its remaining $30 billion in defaulted debt so it can regain access to global financial markets. It lost access after a $95 billion default in 2001.

The government is running out of financing options and views the global market as a cheaper alternative to the patchwork of measures it has been using.

Argentina will reopen the 2005 debt swap, when it paid about 30 cents on the dollar for three-quarters of the outstanding defaulted bonds. The government is expected to offer a larger haircut this time.

It needs to settle the situation with the holdouts who have been taking legal action to get full repayment, raising the possibility that any funds in raises in global markets can be seized by the creditors.

Boudou also defended the Bicentennial Fund, saying this will save the country money because the reserves are earning less interest than the government has to pay to borrow.

He added that Finance Secretary Hernan Lorenzino will return this week from a trip to Italy and Germany for talks with individual bondholders to participate in the swap.

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