MercoPress. South Atlantic News Agency

Argentine finances need agreement with “holdouts” for 2009

The global financial crisis is likely to delay a deal between Argentina and “holdout” creditors who rejected a 2005 debt swap, leaving the country to rely heavily on domestic sources to confront its financing needs next year.

The Argentine government is analyzing a proposal put forward by three major banks to strike a deal with creditors that would provide fresh revenue at a time of falling global prices for its key commodities exports. But recent volatility in global markets has plummeted prices for Argentine bonds, making them less attractive to investors than when the swap proposal first surfaced in September. "It made a lot of sense to participate then, but not now," said Alberto Bernal, head of emerging markets macroeconomic strategy at Bulltick Capital Markets in Miami. "If we have a rally back to price levels a few weeks ago, the (debt) exchange will be back in play." Argentine officials have said they plan to go ahead with the proposal, which calls for debt in default since 2002 to be exchanged for Argentina's 2033 Discount bonds and implies a 65% reduction in capital. The banks behind the proposal, Barclays Capital, Deutsche Bank and Citibank, represent some of the bondholders who refused to participate in Argentina's over a hundred billion US dollars sovereign debt swap in early 2005. The banks' proposal also envisions a separate refinancing plan for holders of bank loans known as "guaranteed loans" coming due in the next few years. Those two swaps could allow Argentina to raise up to 6 billion US dollars, Argentine officials have said. The country faces financing needs totalling 11.8 billion next year, with capital and interest payments worth more than 20 billion coming due, according to Economy Ministry data. In its 2009 budget proposal recently presented to Congress, the government said it would service its debt through auctions in the local market, direct bond sales and Treasury note sales to state agencies. Argentine officials have said they would also consider tapping funds at state-owned Banco Nación or the central bank's foreign currency reserves, which currently stand around 50 billion US dollars, two options also included in next year's budget.