Argentina speeds up new offer to restructure debt

The South American country would include overdue interests (some $18 billion) to make its original proposal more attractive to bondholders.

Several sources confirmed on Monday press versions over a new offer Argentina would make to narrow differences with bondholders and restructure $99.4 billion in debt, some two and a half years after the South American nation carried out the biggest default in history. The Argentine government will add to its previous proposal presented in Dubai by September 2003, overdue interests for up to $18 billion, which would bring down the original cut from 75% to 60% out of the total.

“The proposal will be over in the next hours,'' Interior Minister Anibal Fernandez said on Monday to local radio. “We will be unveiling it shortly but I'm not in a position to say exactly when it will be announced.'' Economy Minister, Roberto Lavagna, also confirmed the information in a TV aired interview Monday night. “The new proposal is technically finished”, he said, as announced it will be available for creditors by the first weeks of June.

Argentina last year said it would pay 25 cents per $1 in face value on the defaulted bonds, an offer that was rejected by bondholders and spurred dozens of lawsuits. Newspaper Clarin said the government would improve that offer by recognizing past due interest in the new proposal.

To illustrate the good mood in the markets, the 7 percent bond due 2008, the government's most-traded bond, rose on Friday to 29.25 cents on the dollar. The bond is unchanged Monday in New York because the U.S. bond market was closed for the Memorial Day holiday.

However, as each and every top official in president Nestor Kirchner’s administration repeated until last week that Argentina would not move from the original offer, the government is currently studying communication strategies to announce the new position. This is a very sensitive point, as a mistake here could make Kirchner to lose some of his tremendous support among the population, which after one year in office is still over 75%, according to last researches.

An IMF mission will visit Buenos Aires in June to control Argentina’s achievements in keeping budget surplus and other financial goals agreed by both sides in September last year. According to sources in nation’s Ministry of Economy, the South American country has already met such obligations.