STOCK MARKET WATCH -- Friday, 6 September 2013

[Demeter]

3. Argentina's Senate approves reopened debt swap in goodwill gesture

http://www.reuters.com/article/2013/09/05/argentina-debt-congress-idUSL2N0H01E920130905

Argentina's Senate voted Wednesday to indefinitely open a bond swap of defaulted debt as part of a bid to signal the country's eagerness to accommodate "holdout" creditors ahead of a review by the U.S. Supreme Court. The government of President Cristina Fernandez said last week that it was reopening a bond exchange after a U.S. court ruled it was unfairly excluding holdout hedge funds that rejected restructuring plans in the past.

The 2nd U.S. Circuit Court of Appeals in New York issued a stay delaying implementation of its order to pay holdout creditors $1.33 billion pending a review by the U.S. Supreme Court, which starts its new term in October. Argentina has refused to pay holdouts unless they accept the same terms used in its last exchange in 2010. Around 93 percent of creditors accepted restructurings in 2005 and 2010 that gave them less than 30 cents on the dollar, while holdouts have fought for the full amount in the courts.

The new debt swap will apply the same terms as those of Argentina's 2010 exchange. Apart from being open-ended to encourage creditors to opt in without deadline pressure, the new swap will also offer bonds governed by foreign law, a government source told Reuters on Friday - part of Argentina's less defiant approach to holdout creditors it calls "vulture funds."

The legislation, approved 58-8 by the Senate late on Wednesday, is expected to be passed into law by the House of Representatives in coming weeks.

The defaulted debt swap will be the country's third in less than a decade as it continues to struggle with the legal and economic fallout of lingering unpaid debt in the market after its record $100 billion default in 2002. If Argentina refuses to pay the holdouts in full, U.S. courts could block payment overseas to bondholders who opted to restructure in the past - potentially triggering another debt crisis and undermining a recovery in South America's third-biggest economy.