MercoPress. South Atlantic News Agency

Argentina swaps 4.3 bn USD local debt for long term bonds

CFK: "This is the most important voluntary exchange in the history of Argentina"

Holders of 15.1 billion pesos (4.3 billion US dollars) of Argentine local debt agreed to swap the securities for longer-term bonds in an exchange the government set up to help cover its growing financing needs.

President Cristina Fernandez de Kirchner announced on Wednesday that 97% of locally based holders of the so- called guaranteed loans accepted the offer to take new five-year bonds. The government will extend the swap offer next month to the 3% of locals who rejected it as well as to international holders of the securities, indicated Cabinet Chief Sergio Massa. "This is the most important voluntary exchange in the history of Argentina" Mrs. Kirchner said at a ceremony at her Olivos residence. Argentine bonds rallied ahead of the announcement, with yields falling to the lowest since Mrs. Kirchner announced in mid- October that the government would nationalize private pension funds. The yield on Argentina's dollar bonds due in March 2011, known as Bonars, fell 4.2 percentage points to 50.94%, according to JPMorgan Chase & Co. The bond's price rose 3.05 cents to 48.5 cents on the dollar. The swap is part of an effort from the Argentine government to plug a financing gap that has swelled as commodity export revenue slumped. The exchange will reduce the government's debt payments by 5.4 billion pesos this year, Massa said. In all, about 4 billion of the 12 billion US dollars outstanding of guaranteed loans -- so called because the debt was initially backed by revenue from a financial transactions tax -- was set to mature this year, according to estimates by Credit Suisse Group AG. The government gave creditors the guaranteed loans in November 2001 in exchange for bonds as it unsuccessfully sought to stave off a record default on 95 billion of bonds in December of that year. The new five-year bonds will pay an interest rate of 15.4% in the first year and 2.75 percentage points over the Argentine inter-bank rate after that, Massa said.