Argentine Bondholders: To Swap or Not to Swap?

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Aug. 20 (Bloomberg) -- Argentina’s bonds sank the most in two weeks after the government said it plans to pay foreign-currency notes locally to sidestep a U.S. court ruling that blocked payments and caused its second default in 13 years. Bloomberg’s Katia Porzecanski reports on “Bottom Line.” (Source: Bloomberg)

U.s. court ruling that blocks payments to bondholders, authorizing payments of foreign debt in localized accounts.

We have more of the details.

Is this a backdoor right here?

Yes, one that has been floated around for about a year now.

The judge in new york has said that this is against the law and they can't do this, but yesterday they brought it back up from the dead and said that this is what they are going to do.

Again, it has been in the back of everyone's mind that this would be their last resort, but what it does is it tells everybody that all of these arguments they have been making up -- making along the way about why they can't a -- the holdouts, elliott management, the clause in the bond contract, it makes it seem like this was all a lie the whole time and this was their plan that was up there sleeve.

Write interesting.

The decision was made in buenos aires -- interesting.

The decision was made in buenos aires.

Is this plan doable?

That is the real question.

It depends on what investors want to do.

The way that the plan is laid out, we are going to put the money in an account in argentina, take it or leave it.

It is basically saying to hell with the bond contract, to help with everything that you can see one -- you are not supposed to change the trustee or the jurisdiction.

The other option is you can swap your bonds to make it official, but along the way the people involved are going to run into some legal challenges.

This is all against u.s. law to do this.

If you are an investor you need to consider potentially being sued for going forward.

The current trustee, bank of new york mellon, according to what the argentines were saying, payments would be made into an account at the central bank instead of through bank of new york mellon.

Talk to us about the dynamics of this and how mellon was involved.

In the contract the debtor makes payments through a trustee agent.

Then the trustee was bank of new york mellon, hired from the get go to be the trustee.

The trustee is responsible for dispersing payments.

Bank of new york mellon is a u.s. bank.

They are bound by this ruling that argentina can't make payments until it pays hedge funds that hold their bonds from 2001. they are basically saying -- remove bank of new york mellon as trustee and put in a new argentine trustee, a state-run bank, and we can tell them whatever we want them to do because they are argentine.

Lacks all right, -- all right , to be continued.

What did they say?

Three as her and curiouser.

[laughter] next we will check in with trish reagan to see what is on tap for the street smart" at the top of the hour.

"bottom line," we will be right back.


This text has been automatically generated. It may not be 100% accurate.


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