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Seeking to guarantee that the bondholders drop their lawsuits through the swap
La Nacion
March 17, 2010

It will be verified if those who enter the operation will abandon their lawsuits; waiting for report from SEC

Mart n Kanenguiser
LA NACION

While praying for the U.S. Securities and Exchange Commission to bless the swap as soon as possible, the government already prepared a mechanism to ensure that the bondholders who filed lawsuits against the country drop their cases.

So explained qualified sources in the Economy Ministry last night to LA NACION, who also reiterated, as they do every week, that "the approval of the United States is about to arrive."

When the swap was presented last year, Economy Minister Amado Boudou said that they would ensure that the bondholders that enter the swap drop their lawsuits filed against the government, but without detailing how they'd manage to do it.

Now it is known that each bondholder will have to individually sign, in exchange for the bonds, a declaration in which it states whether or not they have filed a lawsuit. And then at the close of the operation, the government will check in the courts if they have complied with that commitment. "It's seen as a mechanism used many times in renegotiations of private debt, but it was not used in the 2005 swap; the goal is to minimize the subsequent lawsuits on an operation that is about to be launched," said the sources.

Thus, when each investment fund accepts to be added to the swap, they will have to individualize their clients, a demand that could create doubts in those that didn't declare their investments in bonds to authorities.

The final goal of the government is to reduce the number of embargoes abroad if the swap comes together to avoid complications in future payments to their creditors.

Meanwhile, yesterday the minister spent almost all day meeting with Finance Secretary Hernan Lorenzino to prepare the details of the offer, ready to launch it once the long-delayed approval arrives from the U.S. Securities and Exchange Commission.

In the market, they continue saying that this process will continue to be delayed over the doubts over the questioned official statistics and developments around the use of Central Bank reserves to pay debt. But in the Economy Ministry, they say that, after already passing through three rounds of questions and answers, there are only "two or three details left that will be responded to briefly."

Boudou and Lorenzino's top bet is to travel the day after tomorrow to the annual summit of the Interamerican Development Bank (IDB), which will be held until Tuesday in Cancun, Mexico, with this regulatory endorsement.

If that doesn't occur, they will equally reinforce there the message that the swap is moving ahead and that the country has the conditions to comply with its commitments this year, still if it doesn't return to the voluntary market. "If it ends up with the confirmation of the use of reserves for the fund for dis-indebtedness, that's better; if not, they'll go back to using funds from the public sector to comply with payments," said an official source.

Rates and prices

On that, if interest rates continue to be high to emit debt, the intention is to "squeeze" the available funds from ANSeS, Banco Nacion, and the accounting yields from the Central Bank from 2009, which surpasses 20 billion pesos.

Officials will meet - accompanied by BCRA President Mercedes Marco del Pont - with banks, investment funds, individual clients and risk analysts that will be at the annual IDB meeting to close deals with Latin American countries.

At the ministry, they point out the conjunction of efforts with the BCRA, "different from what happened in the past" during the term of Martin Redrado, when all meetings with investors were held separately.

Despite all of these certainties, qualified analysts continue to have doubts about the launch of the swap. "Bond prices have factored in the idea that the swap is happening, but as time passes, doubts increase," said a qualified observer.

At Economy, they trust that in the three banks that organized the swap, led by Barclays, they form a critical mass, more than US$10 billion. However, there are insistent rumors that indicate that Citi warned that it would give up its place over a fight over commissions with the British entity.

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