Argentine Congress Passes New Debt Swap Bill

By a vote of 134 to 99, Argentina’s Congress voted into law the bill proposing a new debt swap, which would take place outside of U.S. jurisdiction.

The Sovereign Payment of Foreign Debt Law authorizes Argentina to remove Bank of New York-Mellon as the official trustee bank of the 2005 and 2010 debt restructuring, replace it with a unit of the state-owned Banco de la Nacion, and offer a voluntary swap to restructured bondholders—and holdout vultures, should they choose to participate—under the exact same terms as the earlier bond swap, governed either by Argentine or French legislation.

The government doesn’t see the new bill as a magic bullet, recognizing significant obstacles to be overcome. Speaking Sept. 9 before several committees in the Lower House of Congress, Finance Minister Axel Kicillof admitted that a majority of bondholders don’t necessarily want a change of venue for payment, but that Argentina doesn’t have the option of continuing under existing conditions. Argentina is open to any suggestion of other options as to where payment might be made, he said.

What the Finance Ministry has made clear, is that the next $200 million interest payment on Par bonds owed to restructured bondholders, due Sept. 30, will be deposited in the new Banco de la Nacion account. Were it deposited in BoNY, it would almost certainly never reach the bondholders. Removing BoNY as the trustee bank is not an automatic process, and it could even pursue legal action against Argentina, Pagina 12 reports today. Any dealings with BoNY are out of the question.

Whatever the obstacles, Kicillof told legislators that “we want to show Paul Singer, U.S. legislators, and the whole world that Argentina is willing to pay.”

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