NEW YORK: Argentina offered to repay its debt to two New York hedge funds with cash and new bonds on conditions similar to those of a 2010 debt swap, but the plan is seen as unlikely to be accepted.
The South American nation, which is facing a court order to pay out $1.3bn to bondholders on debt it defaulted on during its 2001 crisis, submitted its offer to the New York Court of Appeals shortly before midnight.
“The Republic proposes, following the terms of the 2010 exchange offer, to compensate plaintiffs with their choice of par or discount,” said the document filed by the law firm of Cleary, Gottlieb, Steen & Hamilton.
Argentine President Cristina Kirchner had already said she was willing to re-extend the restructuring terms of 2005 and 2010 to hedge funds NML Capital and Aurelius Capital Management, which she has branded “vultures.” That offer would repay the investors around 70 percent of their capital in nominal terms as the bonds mature in the next 28 to 33 years.
Those terms were already accepted by holders of 92 percent of the bonds but have been rejected by the holdouts.
If Argentina’s latest offer is rejected, the government would be forced to repay the hedge funds in full now, as New York judge Thomas Griesa ordered late last year in a landmark judgment.
But because of “pari passu” or “equal treatment” clauses in the restructured bond contracts, Buenos Aires could be forced to pay back all others at the same time, possibly forcing it to default on all its debt. “The proposal fulfils the court’s dual objectives to satisfy the pari passu clause: non-discrimination in payment priority and equal treatment among bondholders,” the Argentine document said.
“This proposal is a voluntary option: plaintiffs can choose between being paid ‘equally’ on the same terms as the exchange bondholders, or obtaining, and seeking to execute on, judgments for the full amount of their claim,” it said.
According to the filing, plaintiffs will receive “significant compensation” while the country’s capacity to pay will be preserved.
The proposal also calls for repaying small individual investors with so-called Par and GDP bonds along with cash for the past-due interest.
AFP
