Argentina says 'many creditors' want to swap into local law debt

Fri Sep 5, 2014 5:47pm EDT
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By Hugh Bronstein

BUENOS AIRES (Reuters) - Many investors are interested in swapping global Argentine bonds for paper governed by local law, the government said on Friday, a day after the Senate approved the proposed debt exchange as a way to circumvent U.S. court rulings.

Argentina defaulted in July after the New York court that governs some of its original bond contracts blocked a coupon payment. The proposed swap into local law bonds is Argentina's way of trying to get around the U.S. court orders.

If the swap fails and Argentina stays in default, it would be another blow to Latin America's No. 3 economy as it contends with high inflation and recession.

"There is obviously willingness among many creditors, or bondholders, to participate in the sovereign debt payment law, in order to get the money that is owed to them," cabinet chief Jorge Capitanich told reporters.

Argentina's debt saga started with its 2002 default on about $100 billion in bonds. Most holders got less than 30 cents on the dollar in two subsequent restructurings, while a small group of hedge funds went to court for full repayment.

The debt swap bill, passed by the Senate on Thursday and expected to become law later this month, would allow holders of $29 billion in bonds under foreign law to swap them for paper governed by Argentine law.

This would defy the court ruling that says Argentina is prohibited from paying holders of its restructured bonds without also paying the hedge funds $1.3 billion plus interest.

A mediator appointed by the U.S. court said "unresolved" issues still separated the two sides and were preventing a settlement.   Continued...

People walk in Buenos Aires' financial district, August 14, 2014. REUTERS/Marcos Brindicci