Argentina to Reopen Debt Swap After Adverse U.S. Court Ruling

Argentina will send a bill to Congress tomorrow to reopen a debt restructuring for those creditors who haven’t accepted previous swaps after the nation’s 2001 default, said President Cristina Fernandez de Kirchner.

The new swap, if approved by Congress, will offer holders of defaulted debt the same securities issued in previous restructurings in 2005 and 2010, Fernandez said in a nationally televised speech. She also said that holders of restructured bonds, who accepted discounts of as much as 70 percent, will be able to swap them into securities governed by Argentine law in a bid to prevent payment disruptions from a U.S. court ruling in favor of the holdouts.

The announcement came after a three-judge panel in a U.S. appeals court rejected Argentina’s attempt at reverting a ruling in favor of the defaulted debt holders, led by billionaire hedge fund manager Paul Singer’s Elliott Management Corp. and Aurelius Capital Management LP. Argentina argued that forcing it to pay holdouts at the expense of investors of restructured debt would violate its sovereignty and expose it to a fresh financial crisis by receiving billions of dollars in new claims. Fernandez rejected the court’s titling of the country as “a uniquely recalcitrant debtor.”

“Instead of recalcitrant debtors, we are serial payers,” Fernandez, 60, said in her speech, adding that the country has paid about $174 billion in debt since 2003. “The ruling ignored the country’s accords reached with 93 percent of holders of defaulted debt.”

With the effect of the ruling delayed until the U.S. Supreme Court decides whether to hear the case, a resolution may not come until the first quarter of 2014, according to law firm Shearman & Sterling LLP.

“We beg God to illuminate the U.S. Supreme Court,” Fernandez said.

The changing of jurisdiction on performing debt governed by international law will be voluntary and depending on the nation’s request for the Supreme Court to take their case, a government official, who isn’t authorized to speak publicly about the plans, said in an interview. The re-opening of the swap is intended to show the Supreme Court the nation’s willingness to pay, he said.

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