Argentina decided Thursday to postpone its scheduled April 1 exchange of defaulted bonds waiting for New York court ruling regarding frozen securities included in the operation.
The bond swap - which would put an end to Argentina's largest ever default, (81 billion US dollars plus interest), was scheduled for Friday but "it has been delayed," said Cabinet chief Alberto Fernandez, emphasizing that the government hoped that the situation would be solved "rapidly". Mr. Fernández said Argentina is waiting a New York appellate court ruling on whether to maintain an embargo on some 7 billion US dollars worth of bonds that are included in the huge exchange operation.
The freeze, requested by an investment fund that rejected the bond swap, was implemented last Tuesday by New York Judge Thomas Griesa, who - however - agreed to let the matter be decided in an Appeals court.
"What we need is the confirmation of the New York judge's ruling. We're confident that it will be done quickly and that we can rapidly move forward on making the exchange a reality" Mr. Fernandez said during a Buenos Aires radio interview. Mr. Fernandez stressed the Argentine government was sure that "at any moment" the bond swap operation would be able to move forward.
The Argentine defaulted bond exchange includes an initial payment -originally scheduled for Friday April 1- of 680 million US dollars in interest to just over 76% of creditors who accepted conditions imposed by President Kirchner's administration to end the default situation which was pending since 2002.
The operation includes swapping defaulted bonds face valued 62,318 billion US dollars for new ones valued 35,261 billion US dollars. This means creditors will be receiving 30 cents for each defaulted bond dollar.
Argentine Economy Ministry officials quoted by Buenos Aires daily La Nacion admitted that the exchange operation could be delayed until mid-June because other creditors could present appeals similar to the one by NML Capital, described as a "vulture" fund that led to the court-imposed freeze in New York. "In a normal appeal case the oral hearing for each side to present its case is fixed for six/eight weeks after the appeal was initiated", said a member of the New York Court.
Nevertheless the Argentine government is confident it will move faster given "the number of people and money involved", according to an Argentine official who routinely is in contact with the New York attorneys' office representing Argentine interests.
These dilatory tactics, with embargo and negotiations, enabled one of the "vulture" fund collect 56 million US dollars from the Peruvian government, and now "they are attempting something similar with Argentina". "The strategy of these bond holders is to somehow lock the swap process and then try to negotiate in terms similar to those reached with Peru. This is the usual dynamics of the restructuring process for those who did not adhere to the bond exchange", said an Argentine official.
NML Capital which rejected Argentina's restructuring offer is linked to Elliot Associates a group that forced Peru to pay 56 million US dollars in defaulted debt in a landmark case during the 1990. NML is thought to hold three different types of Argentine defaulted bonds with a combined value of over 300 million US dollars plus interest