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Paris Club payment is back on the agenda
La Nacion
July 15, 2010

Studying return to the plan after the swap

July 15, 2010

By Martin Kanenguiser

With the swap to exit the default with the bondholders now closed, the Economy Ministry, led by Amado Boudou, is preparing to pay the next maturity of the Boden 2012 with Central Bank reserves and to resuscitate the payment negotiations with the Paris Club, trying to take the International Monetary Fund (IMF) out of the middle. Qualified sources at the Palacio de Hacienda told LA NACION that most of the payment of the US$2.3 billion for the Boden, on August 3rd, will come together with the assets of the BCRA captured by the government to pay debt.

While the first and last names of those who entered the swap are determined, to liquidate the payment of new bonds on the 11th of next month and to try to close off the embargoes abroad, they've already begun plans for "the day after" at the ministry.

One initiative is to analyze the evolution of sovereign risk to know if it's feasible to relaunch the idea of a voluntary placement of the Global 2017 bond, frustrated during the transaction of the bonds in default. "The world is heading toward normalization and that will benefit Argentina, by the high liquidity of emerging nations," it was pointed out.

In this context, Argentine bonds are interesting for their high yields, and "the technical work is to be able to go out to the market when these conditions are abounding." In official language, this means when the interest rates are at one digit.

For now, there were timid proposals from investment banks for this emission and to do a bond swap from euros to dollars. Market sources say that there is a strong interest for this swap and official sources said that it could be convenient for the government for financial and exchange rate reasons.

On the judicial front, the lawyers at Cleary, Gottlieb, Steen & Hamilton, who represent the country abroad, traveled to Buenos Aires to seek a formula that allows asking U.S. courts to close the door to new embargoes.

One of the possibilities is to use the so-called "cramdown" of private rights, to show that the majority of creditors already accepted a payment plan and that the remaining minority must accept the same formula.

At the same time, conversations are continuing with Lazard bank and other entities to put the payment to the Paris Club back in motion, which was announced and then frustrated in 2008.

According to the official source, the context of the global crisis facilitates the negotiation without the IMF in the middle. "The dogma of having to pay the Club with the IMF is over," they said. There are tougher countries (Germany, Canada) that refuse to take the power of the IMF away, while the US could be more permeable if Argentina presents a payment plan over two years for the debt of US$6.7 billion.

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