MercoPress. South Atlantic News Agency

Argentina pays 500m dollars and settles pending disputes with private companies

Minister Lorenzino: Argentina will hand bonds due 2015 and 2017 with a face value of 506 million dollars

Argentina agreed to compensate five companies that won rulings over investment disputes as the country looks for the World Bank to approve 3 billion dollars in loans. The companies agreed to accept payment in dollar bonds and to reduce the principal amount of their awards by 25%, the Argentine economy ministry said Friday in a statement.

Argentina will hand over local law bonds due 2015 and 2017 with a face value of 506 million for the 677 million dollars of claims, Minister Hernan Lorenzino revealed on making the announcement.

Argentina has been sued more than any other country in the World Bank’s arbitration court (International Centre for the Settlement of Investment Disputes) by investors, utilities and energy companies pursuing reimbursement for currency devaluations, nationalizations and rate freezes after the nation’s 95 billion dollars default in 2001.

To enforce existing arbitration judgments, the US, the World Bank largest shareholder, suspended in March 2012 Argentina’s participation in a trade program that allows certain goods from developing countries to be imported duty-free.

“The agreements with the companies that had obtained firm rulings, which allow for the normalization of 677 million of debt, were obtained in extremely favourable conditions for the country,” the ministry said, and added that “the Republic won’t be using cash or international reserves” for the payment.

Companies involved are Blue Ridge Investments LLC, which owned rights to CMS Gas Transmission Company claims, CC-WB Holdings LLC, which owned rights to Continental Casualty Company claims, Vivendi Universal Sociedad Anonima, Cia. de Aguas del Aconquija Sociedad Anonima and Azurix Corp. Argentina also agreed to compensate NH-UN Holdings LLC, which owned claims from National Grid (NG).-

In addition, the companies agreed to invest 68 million dollars in a government bond that matures in 2016 and carries a 4% annual interest rate, the Economy Ministry said. Proceeds from the so-called BAADE bond will be used to finance energy projects in Argentina.

Argentina is settling the outstanding claims in part to tap World Bank loans, Buenos Aires-based newspaper Ambito said Oct. 10. The WB is considering lending 3 billion to be disbursed through 2016, Economy Minister Hernan Lorenzino said Oct. 10.

Argentine bonds have rallied since Oct. 10 on speculation the nation will obtain fresh funds from the World Bank and settle some of the outstanding arbitration claims in a sign the government is normalizing relations with international financial institutions.