Argentina expects to launch within three weeks a swap to take up to $20 billion in defaulted bonds off the market and pave the way to issue new debt, Finance Secretary Hernan Lorenzino told Reuters on Sunday. Lorenzino said Argentina had received final approval from the US Securities and Exchange Commission on the deal, which aims to clear up fallout from the country's massive 2001/2002 default and also to raise funds to meet soaring debt obligations this year.
"On Friday, we had the SEC approval which shortens the launch calendar. In two to three weeks we should be launching," Lorenzino said during the annual Inter-American Development Bank meeting in Cancun. He said Argentina was also finalising paperwork needed for the swap with regulators in several countries including Luxembourg. Italy paperwork would be filed Tuesday, he said.
The swap aims to take off the market up to $20 billion in defaulted bonds, neutralising legal challenges to new Argentine debt issues eight years after the country's $100 billion default hurt bondholders from Italy, Japan, the United States and elsewhere.
Bondholders who enter the swap are expected to also commit to buying up to $1 billion in fresh bonds, helping Latin America's No 3 economy ease tight financing this year.
The swap has been delayed several times as the SEC requested explanations on issues such as Argentina's official economic data, which is widely criticised as manipulated. Bond prices jumped last week when the SEC made public Argentina's final amended shelf filing for the swap and for an issue of up to $15 billion in new bonds.
Economists estimate the country faces some $15 billion this year in payments on debt and has a funding gap as wide as $7 billion. President Cristina Fernandez vows to maintain social spending in this pre-election year even though growth in tax revenue has shrunk and rampant inflation has eroded her popularity.
Her husband, ex-President Nestor Kirchner, is a potential candidate for the presidency again in 2011. In 2005 Argentina restructured its defaulted debt, forcing bondholders to take steep losses or get nothing. But about 25 percent of investors rejected the deal, and many of them sued Argentina to try to recover the full value of their investment. Of those so-called holdouts, 50 percent are already committed to entering the reopened restructured debt, the government says. An acceptance rate of higher than 60 percent would be considered successful.
However, Economy Minister Amado Boudou has said retail bondholders - such as pensioners in Italy - who bought the bonds when they were fully priced will be offered slightly better terms than institutional investors who might have bought the debt dirt cheap after the default.
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