MercoPress. South Atlantic News Agency

Kirchner optimistic with defaulted bonds exchange

Argentine president Nestor Kirchner “kindly” called on all creditors of the country's defaulted sovereign debt to remember that this week is the last chance to accept the exchange for new bonds.

"I'm telling you there's four days left, and I'm suggesting you accept the bond swap since there will be no other offer. I'm telling you this in the most kind and polite way", said President Kirchner Monday during an official ceremony.

With the bond exchange Argentina expects to cut its defaulted debt from 102,6 billion US dollars (capital and interest) to 41,8 billion US dollars. The original debt was 81,8 billion US dollars but with interests pending since 2002 it climbed to over 100 billion.

The much criticized bond swap proposed by Argentina means creditors will be loosing up to 70% of the original bonds face value.

According to the latest official information, February 11, a total 37,8 billion US dollars had been exchanged for the new bonds, representing 36,9% of debt plus interest creditors and 46,3% capital only creditors.

In Argentina acceptance of the bond swap had reached last Friday 90% of the 27 billion US dollars belonging to Argentine residents and investors.

"The bond exchange process is moving normally and finishes next Friday 25 as was anticipated", indicated Argentine Economy Minister Roberto Lavagna, architect of the complex financial mechanism which is expected will help Argentina return to international money markets.

The acceptance level of the program is considered "encouraging" by several Buenos Aires market analysts who anticipate the level will finally range between 65/80%.

"If eventually this is achieved, the debt restructuring debate with the International Monetary Fund will cool down and another stand by agreement should be rapidly reached", anticipated Mario Blejer a former economist with the Bank of England and Argentina's Central Bank.

The Wall Street Journal forecasted a 75% bond exchange acceptance and said that Argentina "is closer and closer to victory" and this "should be a lesson for investors". "This will mean a new beginning for Argentina as well as a lesson for investors about the risks of sovereign defaults".

After describing the Argentine exchange process as "very complex" because it involved 152 different bonds and 500,000 bond holders, The Wall Street Journal argues that Argentina was able to "hold its ground" in spite of a flood of criticisms, because "US federal bonds rates remain close to their historic minimum and international liquidity is flooding emerging markets".