Sept. 21 (Bloomberg) -- Argentina’s $20 billion of defaulted bonds are trading at a one-year high as speculation builds that President Cristina Fernandez de Kirchner will revive a 2008 debt restructuring plan as early as this week.

The bonds jumped to 28.5 cents on the dollar from 15 cents in June, according to Exotix Ltd., a brokerage that specializes in distressed securities. Investors are betting Fernandez will make an offer to creditors who refused a settlement four years ago to allow the country to return to international markets for the first time since it defaulted in 2001, said Aberdeen Asset Management Plc.’s Edwin Gutierrez.

A six-month rally in emerging-market debt cut Argentina’s yield gap over Treasuries by more than half to 7.42 percentage points, approaching levels low enough to permit the government to issue debt and meet growing financing needs, said Gutierrez, who manages about $5 billion in emerging-market debt. Fernandez shelved the restructuring plan she unveiled in September last year as global credit markets seized up.

“They want international market access again and they need to take care of the untendered debt to get it,” Gutierrez, who holds some defaulted bonds, said in a telephone interview from London. He declined to say how high the government payout would have to be for him to participate in a settlement.

IDB, Columbia

Fernandez, 56, is slated to attend the United Nations General Assembly this week in New York, where she announced on Sept. 22, 2008, that the government was working on a debt proposal. The bonds traded as high as 29 cents that month.

Fernandez met today with the head of the Inter-American Development Bank and spoke at Columbia University, a spokeswoman at the presidential palace said. She said she had no information on Fernandez’s agenda in New York beyond today.

Dow Jones Newswires, citing a person familiar with the matter that it didn’t name, reported that the government plans to make a restructuring offer that will include the payment of interest accrued since 2003. Investors holding about $8 billion of defaulted bonds have agreed to the terms of the settlement that the government will propose, Dow Jones reported, citing the person.

Economy Minister Amado Boudou told reporters today that the proposal is one of several the government is evaluating.

‘Long Way to Go’

“We have been talking with different groups, important banks and investment funds,” Boudou said today at the Economy Ministry in Buenos Aires. “We haven’t arrived at a definitive strategy.”

Guillermo Mondino and Sebastian Vargas, analysts at Barclays Plc, told clients in a report that the accord outlined by Dow Jones “is unlikely” to be the government’s final proposal to bondholders.

“The process has a long way to go before the decision- makers give a go ahead to a specific proposal,” Mondino and Vargas wrote.

The government said last year that it was working with New York-based Citigroup Inc., London-based Barclays and Frankfurt- based Deutsche Bank AG on the restructuring proposal. A spokeswoman from Citigroup and spokesmen with Barclays and Deutsche Bank declined to comment.

Jaime Valdivia, who manages $800 million of assets for Emerging Sovereign Group in New York, said he’s “skeptical” the government will make an offer. He said he was at the New York luncheon last year when Fernandez announced the restructuring plan.

‘Where Are We?’

“It’s a year later and where are we?” Valdivia said.

Argentine bonds have rallied this year as the government extended maturities on $9.6 billion of local debt and as the global crisis abated, damping concern the country would default for a second time this decade.

The extra yield investors demand to own Argentina’s dollar bonds instead of U.S. Treasuries has fallen 12.23 percentage points from 19.65 points on Nov. 14, according to JPMorgan Chase & Co. The bonds returned 114 percent this year, the most of any securities in JPMorgan’s benchmark EMBI+ emerging-market index, after falling 58 percent last year.

“They are missing an incredible window of opportunity to tap markets,” Valdivia said.

Argentina’s borrowing requirements rose this year to $10.7 billion from $5.9 billion in 2008 as the global recession eroded tax revenue from commodity exports, according to Carola Sandy, an economist with Credit Suisse Group AG in New York.

Lawsuits

The country halted payments on $95 billion of debt in 2001, the biggest sovereign default ever. Four years later, the government gave creditors securities worth about 30 cents on the dollar, the harshest restructuring by any country since World War II, according to Arturo Porzecanski, an international finance professor at American University in Washington.

Lawsuits from creditors who rejected the offer, including an investment fund owned by billionaire Kenneth Dart, are preventing the government from selling bonds in international markets.

Boudou, who took office in July, told legislators Sept. 17 that regaining access to overseas markets will help fuel credit growth in the economy. A day earlier, the government submitted a 2010 budget bill to congress that states the administration plans “to continue to advance with the process of normalizing” its relationship with creditors, including the holdouts from the 2005 restructuring.

Markets Last Week

The bill contains another clause that would fulfill the government’s legal requirement to obtain legislative approval for a restructuring offer, Credit Suisse’s Sandy said. She predicts the government will have a settlement concluded by the first half of next year.

Last week, the yield on Argentina’s benchmark 8.28 percent dollar bonds due in 2033 dropped 68 basis points to 11.99 percent, according to JPMorgan. The bonds’ price rose 4 cents on the dollar to 70.1 cents. The peso rose 0.5 percent to 3.8369 per U.S. dollar from 3.8559 on Sept. 11.

The Merval stock index advanced 5.7 percent to 2,007.60. Siderar SAIC, the country’s largest steelmaker, rose 9.5 percent for the biggest gain in the index.

The following is a list of events in Argentina this week:

Event Date Industrial Production (August) Sept. 25 Economic Activity (July) Sept. 25

To contact the reporter on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net

Last Updated: September 21, 2009 17:16 EDT