Most Bondholders Agree to Argentina’s Debt Swap

BUENOS AIRES â€”  Creditors holding 76% of Argentina’s defaulted debt accepted the government’s offer of payment in a new series of bonds that will, on average, give back one-third what was owed, Economy Minister Roberto Lavagna said Thursday.

Lavagna said preliminary results showed $62.2 billion of the total $81.8 billion in principal was approved to be swapped. Analysts, from Buenos Aires to Wall Street, had been expecting an acceptance rate of 70% to 80%.

“The markets have spoken, they have spoken with clarity, accepted very clearly the Argentine government’s proposal,� Lavagna said at a ceremony at the presidential palace.

The government offered to swap $102.6 billion, including past due interest, in default for more than three years, for up to $41.8 billion, at a loss of up to 70% for bondholders, by far the largest in any recent restructuring.

Lavagna also said Argentina would issue $35.2 billion in new bonds. After the swap, the country’s total public debt will stand at $125 billion, or 72% of gross domestic product. Final results of the swap will be announced March 18, he said.

In other recent emerging-market sovereign debt restructurings, investors lost no more than 40% of their capital.

In Argentina, the default and the economic collapse that caused it have shaken the nation. At the height of the crisis, unemployment passed 20%. When restrictions were put on bank withdrawals to keep the financial system afloat, people stopped trusting financial institutions.

President Nestor Kirchner’s government has argued the country cannot pay back more with Argentina’s official poverty rate hovering around 50% of the population and with the economy only beginning to recover after years of recession.

Analysts say the high level of creditor acceptance should be enough for Argentina to secure backing from industrialized nations and the International Monetary Fund.