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The swap is successful in Japan, but the Italians have their doubts and are continuing with lawsuits
El Cronista
June 16, 2010

The Palacio de Hacienda discounts that those who are suing will not accept the offer. Eyes are on the Task Force, which is demanding US$4.3 billion before the ICSID.

The lawsuits by the Italian bondhodlers against the country for unpaid debt could complicate the final stretch of the swap, which needs a massive inflow of investors from that country to arrive at the 60% floor that Economy Minister Amado Boudou set to show satisfaction with the operation. Since last Wednesday, according to official data, the acceptance rate is rounding out to 54% of the US$18 billion in default. The entry of small investors is averaging something more than US$100 million a day. Yesterday, Finance Secretary Hernan Lorenzino confirmed from Tokyo that the entry of Japanese bondholders is massive. There, there are holdouts with at least US$300 million.

But now, the Economy Ministry must seduce the Italians that remain reticent. Official sources admitted that they are concentrating their efforts on the bondholders of that country that have no lawsuits against the country those, to enter, must renounce any litigation. And that the litigating bondholders will continue with their claims.

Although it is not known for sure how many bondholders are staying with the judicial route, the representative of the Task Force, Nicola Stock, says that they make up 180,000 bondholders who are claiming US$4.3 billion before the international tribunals of the ICSID. According to his calculations, there would be another 20,000 holdouts in Italy with some hundreds of millions more.

The calculations of the Palacio de Hacienda are more conservative. They estimate that small bondholders have US$4 billion, of which US$3 billion is in Italy.

Independent of the number of Italians that Stock says he represents, he has power over the majority of the investors with bonds. Stock had given a free hand to those he represents, while having to communicate to him if they would accept the offer or continue inside the group that is waiting for the ICSID to take their case.

Meanwhile, Finance Undersecretary Adrian Cosentino arrived yesterday in Milan to meet with representatives of the main Italian banks, who have the bondholders among their clients and have to approach them with the Argentine offer. While the names of the entities was not revealed, it was seen as some cooperative banks, Unibanco and BNL. Today, Cosentino and Lorenzino will continue with a similar agenda in Milan and Rome.

The operations in Italy are complex. The Argentine officials are meeting with representatives of financial entities, which then have to take their information and the procedures to their headquarters. Those are the ones who contact the clients and approach them with the paperwork. To complete the forms takes time: the Italians have to say that they don't have lawsuits against the country and they have to renounce any as such. Also they have to opt for the Par option, for small bondholders, or the Discount.

In Japan, the process was more pleasing. The ministry discounted that the majority of the holdouts would enter the swap, because the process is concentrated in few banks. Lorenzino confirmed yesterday that, with the restructuring of 2005 and the current one, 99% of the debt in the hands of the Japanese is now normalized. "The adhesion to the transaction from samurai bonds is reaching 72% and of the euro-yens is 82%," he said.

The swap is ending on Tuesday the 22nd. The liquidation of the bonds will happen, including for those who entered in the first round, after that date, due to the operational complexity that they represent for the exchange agent, the Bank of New York, for the more than 150 eligible bonds.

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