Argentina bonds, peso reel on country's debt swap plan

Wed Aug 20, 2014 2:56pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Hugh Bronstein and Alejandro Lifschitz

BUENOS AIRES (Reuters) - Argentina's new plan to skirt U.S. courts and resume payment on defaulted bonds aims to protect creditors who participated in two debt restructurings, the economy minister said on Wednesday as the local peso currency weakened to a new historic low.

Defying a U.S. federal court order, Axel Kicillof also said it would be "madness" to pay holdout creditors the 100 cents on the dollar that they were awarded in 2012.

The government has sent a bill to Congress that would replace its New York intermediary bank with state-run Banco Nacion, the latest move in a years-old legal chess game between Argentina and its "holdout" creditors who refused to participate in the restructuring.

Argentina's black market peso reeled on the news, falling 2.0 percent to an all-time low 13.5 to the U.S. dollar. The country's benchmark dollar-denominated bonds due in 2033 slumped more than 2.0 percent in price.

The legal deadlock is squeezing Argentina's foreign reserves and the availability of dollars in the market by preventing the economically ailing country from issuing international bonds.Last month, Argentina defaulted on an estimated $29 billion of its restructured debt after a New York court blocked an interest payment of $539 million. The payment did not go through to investors because U.S. District Judge Thomas Griesa says restructured bonds cannot be paid unless the holdouts are simultaneously paid 100 cents on the dollar, plus interest.

The $539 million deposited by Argentina remains with intermediary Bank of New York Mellon. Argentina says Griesa overstepped his bounds by blocking the coupon payment, and is moving to ensure future payments go through local banks out of Griesa's reach.

On Tuesday evening, President Cristina Fernandez announced her intention to replace Bank of New York Mellon with state-run Banco Nacion as intermediary. She also offered to swap bonds governed by U.S. law for debt under local jurisdiction.

Kicillof told reporters the proposed swap would neither break existing bond contracts nor be obligatory.   Continued...

 
A blind man (R) begs for money at the front entrance of Argentina's Central Bank in Buenos Aires' financial district, August 20, 2014. REUTERS/Marcos Brindicci