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 The debt restructuring plan aims to enable Argentina to make
payments on its foreign-held bonds locally or elsewhere beyond the
reaches of the U.S. court. It also encourages investors to move
their Argentine debt from the United States or other foreign
jurisdictions to either Argentina or France.
The effectiveness of the law is in question, however, given that
U.S. District Judge Thomas Griesa in New York has declared it
illegal because it violates his order favouring creditors in a
dispute over the country's default in 2002.
"We don't expect a significant participation rate, though the
government will at least send the signal they want: in their view,
they're doing what they can to make the payment," said Alejo Costa,
chief strategist at local investment bank Puente.
The lower house of Congress passed the bill by an early-morning vote
of 134 to 99 following a marathon debate that started Wednesday
afternoon. The law had already been approved last week by the
Senate.
Griesa in June barred Argentina from servicing in debt restructured
under U.S. law in the wake of its $100 billion default in 2002 until
it settled with hedge funds who rejected the terms of its 2005 and
2010 bond swaps and sued for repayment in full.
Argentina's next coupon payment is due on Sept. 30.
Argentine President Cristina Fernandez has accused Griesa of
overstepping his bounds and interfering in Argentina's national
sovereignty. She announced the new debt bill last month to get
around his ruling.
Economy Minister Axel Kicillof acknowledged on Tuesday creditors had
little appetite for the bond swap plan.
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"Regarding the swap ... parties that have any link to the U.S.
jurisdiction might not be willing to cooperate with Argentina
because of the existing orders from Judge Griesa that rule the swap
illegal," said Ignacio Labaqui, local analyst for consultancy Medley
Global. If creditors refuse to participate in the debt swap, the
government can still hope it will succeed in replacing the Bank of
New York Mellon as trustee for bond payments with Nacion
Fideicomisos, a unit of state-controlled Banco Nacion. That way, it
can service its debt locally.
But scepticism over this part of the plan is growing too, and
Kicillof told lawmakers on Tuesday the government was open to
suggestions from bondholders about where to make payments if they
were unhappy with its proposal.
(Reporting by Alejandro Lifschitz; Writing by Sarah Marsh; Editing
by Toby Chopra and Sonya Hepinstall)
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