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Argentine bondholders want access to BIS reserves-INTERVIEW
Reuters
January 25, 2010

By Daniel Flynn and Stefano Bernabei

ROME, Jan 25 (Reuters) - An association grouping holders of defaulted Argentine debt is lobbying the Bank for International Settlements to gain access to some $40 billion in reserves Argentina holds there, its co-chairman said.

Robert Shapiro, joint head of the American Task Force Argentina group dedicated to resolution of Argentina's 2002 debt default, said Buenos Aires was using the Swiss-based BIS to hide money from court orders around the world.

In 2002, Argentina defaulted on some $100 billion in debt: the biggest sovereign default in history. Three years later the government forced investors to take deep losses in a debt swap, but holders of $20 billion in bonds refused and some have since won court cases backing their claims to the bonds' full value.

President Cristina Fernandez aims to launch a new bond swap by February, which she hopes will pave a return to foreign markets, but some bondholders refuse to drop their claims.

"She can hide from legal judgement but she can't degrade and debase an international financial institution to do it," Shapiro said. "Argentina is using the BIS and abusing its international role in order to evade court judgements in the United States and Italy and Japan and England and France."

The BIS, which acts as a bank for central banks and fosters international monetary and financial cooperation, declined to comment specifically on Shapiro's comments and said the litigation Argentina faces from hold-out bank creditors is a matter for Argentina and the creditors.

Latin America's third largest economy holds roughly 80 percent of its $48 billion in foreign reserves with the BIS, according to IMF figures. The average figure is around 4 percent, said Shapiro.

Shapiro said he was using a visit to Italy, home to the lions share of retail investors holding "Tango bonds", to urge Italian central bank and Treasury officials to pressure the BIS into making Argentina reduce its reserves with the bank. He will take the same message to London, Paris and Berlin.

"Italian pensioners say 'Where is my money?', and the answer is 'It's right across the border: it's in Switzerland," he said. "The Italian government ought to do something."

"We want the BIS to tell Argentina you can keep only the funds which you require for the legitimate business of the BIS at the BIS," said Shapiro, a one-time economic advisor to former U.S. President Bill Clinton.

SWAP ACCEPTANCE "IRRELEVANT"

The Argentine government has said it wants to use $6.6 billion of the central bank's reserves to help make some of the $13 billion in debt payments due this year. Fernandez attempted to dismiss the central bank governor when he opposed this plan.

Bondholders argue the plan proves the central bank is not autonomous and its reserves are controlled by the government.

Police stopped the head of Argentina's central bank from entering the bank on Sunday, while he vowed to stay in his job despite a court ruling that the government said meant he had to step down. [ID:n06209372]

"It is likely they have mixed what might be technical reserves with other government assets," Shapiro said, adding that the government had been closing down its foreign bank accounts since 2001 in preparation for the default.

Shapiro said there was no reason for those who rejected the first bond swap to accept this one, which had poorer terms.

Economy Minister Amado Boudou has said institutional investors holding about $10 billion of defaulted bonds, or half the amount outstanding, have committed to the swap being managed by Barclays Plc , Citigroup Inc and Deutsche Bank . Shapiro said the acceptance rate was "irrelevant".

"That would remove the (court) judgements of those whose bonds are being paid off but it doesn't relieve anyone else's," Shapiro said, adding that the swap would mainly benefit 'vulture funds' which bought the debt cheaply on the secondary market.

"As long as those judgements remain in force, Argentina is unable to access international credit markets because any money she raised would be seized in order to acquit that judgement." (Editing by Andy Bruce)

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