MercoPress. South Atlantic News Agency

Argentina opens path to accord with bond holdouts

Cabinet chief Sergio Massa

Argentina signed an agreement with three banks to attempt to restructure debts to sovereign bond holders who rejected a 2005 settlement over a historic default, the government announced Monday.

Cabinet chief Sergio Massa said Barclays PLC, Citigroup Inc. and Deustche Bank plan to negotiate with some 500,000 institutional lenders and individuals suing Argentina in US and European courts over the historic 2001/02 default. Holdout creditors are demanding reimbursement of 20 billion US dollars in bonds, plus interest, after the country's 2001/02 default on about 95 billion in sovereign bonds. The agreement marked a policy reversal for President Cristina Fernandez and her husband and predecessor Nestor Kirchner in an effort to access international credit markets. Massa explained that Monday's agreement is not a public offer by the government as in 2005. Instead, banks will negotiate directly with creditors and then present a debt-swap offer to Argentina â€" which the country can accept or reject. Massa said the agreement is designed to "set off a process to incorporate new capital flow to Argentina" and "improve Argentina's debt profile." He predicted the restructuring will be finished by the end of the year. The Cabinet chief said the new debt swap will be more favorable for the government than the 2005 settlement, when bondholders were offered less than the 33 cents on the dollar. The 2005 swap was rejected by about one in four creditors. Massa would not provide other details of the proposal, saying it first must be presented to the US Securities and Exchange Commission and other financial regulatory institutions. Besides, the agreement needs approval from both Congressional houses. Mrs. Kirchner tried to send positive signals to international investors earlier this month, announcing her government would pay off debt from the Paris Club of lending nations in hopes of opening new capital flows.