Nov. 2 (Bloomberg) -- Argentina probably will retire enough of its $20 billion of defaulted debt in a restructuring offer to gain access to international capital markets for the first time since 2001, said former Finance Secretary Miguel Kiguel.

Lawsuits in the U.S. and Europe from bondholders such as billionaire Kenneth Dart are preventing the government from selling securities overseas. Argentina will persuade as much as 70 percent of holdout investors to accept the proposal, a level that likely is high enough to prompt courts to throw out cases from creditors, Kiguel said.

“A judge could say that Argentina has finally made a reasonable effort and those who didn’t accept the offer are basically vulture funds and are being unreasonable,” said Kiguel, who served as finance secretary in the 1990s and now heads Buenos Aires-based research company Econviews.

President Cristina Fernandez de Kirchner, 56, is trying to regain investor confidence and enable the government to return to foreign debt markets after the global recession curbed tax revenue from Argentina’s soybean and wheat exports. The government’s borrowing requirements rose this year to $10.7 billion from $5.9 billion in 2008, according to Credit Suisse Group AG.

Nestor Kirchner

Fernandez is reversing the stance of her husband Nestor Kirchner, 59, who as president in 2005 pushed a bill through congress that forbid the government from making a new offer to investors who refused to exchange defaulted bonds for new securities worth about 30 cents on the dollar. About 75 percent of debt holders accepted that restructuring offer in 2005, four years after the South American country halted payments on $95 billion of bonds.

Acceptance of the new offer by 70 percent of remaining creditors would reduce the holdouts to below 10 percent.

Economy Minister Amado Boudou, 46, said when announcing the debt swap plan on Oct. 22 that the government was seeking to get at least 60 percent to participate in the exchange. He said creditors would have to put up cash worth 10 percent of their holdings to buy new bonds as part of the proposal. The government submitted a bill to congress last week seeking to overturn the 2005 law.

The defaulted bonds traded today at about 40 cents on the dollar, up from 15 cents in June, according to Exotix Ltd., a London-based brokerage that specializes in distressed assets.

Argentina’s performing dollar bonds have also rallied this year as the global credit crisis eased. The yield premium investors demand to own Argentine bonds instead of U.S. Treasuries has narrowed to 7.15 percentage points from 17.04 points at the end of last year, according to JPMorgan Chase & Co.’s EMBI+ index.

Judges’ ‘Dismay’

Arturo Porzecanski, a professor of international finance at American University in Washington who says the 2005 restructuring offer was the harshest by a government since World War II, expects courts to continue to side with creditors.

Judges “express dismay that Argentina doesn’t pay,” Porzecanski said. “The problem has been finding attachable assets” to collect, he said.

Payments on any new bonds Argentina would issue in international markets could be seized, a reason why the government hasn’t sold debt abroad since the default, Porzecanski said.

Assets that creditors have tried to take over include a liquid natural gas shipment and diplomatic accounts in Belgium and France, according to a Securities and Exchange Commission filing.

Griesa

Argentina faces lawsuits from the holders of “$3 billion to $4 billion” of defaulted debt, Finance Secretary Hernan Lorenzino, 37, said Oct. 28 when asked by lawmakers. Creditors have filed about 135 individual and 18 class action lawsuits in the U.S., 550 cases in Germany and 13 in Italy, Argentina said in the SEC filing on Oct. 27.

Dart’s EM Ltd. investment fund and New York-based hedge- fund firm Elliott Management Corp.’s NML Capital are among the plaintiffs. John Missing, a legal representative for EM Ltd. at Debevoise & Plimpton LLP in Washington, declined to comment on whether the company will abandon its lawsuit and participate in a restructuring. Scott Tagliarino, a spokesman for Elliott, declined to comment.

U.S. District Judge Thomas Griesa in Manhattan -- whose caricature is routinely splashed in Buenos Aires newspapers, often with a vulture perched on his shoulder -- rules on all the cases in the U.S. He declined to comment on how the restructuring would affect his decisions.

Until now, “Griesa has had no other option than to say that Argentina hasn’t negotiated in good faith,” Kiguel said. “Argentina will have a much stronger case” after the restructuring, he said.

Markets Last Week

The yield on Argentina’s benchmark 8.28 percent dollar bonds due in 2033 rose 25 basis points to 12.02 percent, while the peso climbed 0.1 percent to 3.8185 per U.S. dollar from 3.8208 on Oct. 23. The Merval stock index slid 7.9 percent to 2,115.76 points.

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

Event
Vehicle Sales (October)                 Nov. 4
Tax Revenue (October)                   Nov. 2-9
Market Holiday                          Nov. 6

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

Last Updated: November 2, 2009 17:03 EST