UPDATE 1-Argentina offers bond swap to skirt U.S. court rulings
BUENOS AIRES, Aug 26 (Reuters) - Argentina will offer a bond swap on restructured sovereign debt to shift payments to Buenos Aires, President Cristina Fernandez said on Monday, in an attempt to avoid the impact of U.S. court rulings that threaten to interrupt payments.
The voluntary swap covering debt in all foreign markets would only take place if Argentina's ongoing appeals of the U.S. court rulings are rejected, a government source told Reuters on condition of anonymity.
Argentina on Friday lost its appeal of a U.S. court order requiring it to pay $1.33 billion to hedge funds that refused to accept steep discounts when the nation restructured its debt in the years following a record $100 billion default in 2002.
The 93 percent of bondholders who accepted restructurings in 2005 and 2010, receiving less than 30 cents on the dollar, worry that Argentina's refusal to pay bond "holdouts" in the face of court orders could in turn freeze payment of restructured bonds.
Fernandez's proposal of offering a new bond swap immediately raised questions about whether investors would be interested in taking Argentine bonds in lieu of foreign debt, given strict currency and capital controls that the left-leaning Fernandez government has recently imposed.
"Changing the location of the payments to Buenos Aires is going to be extremely complicated amid the currency controls," said Jorge Todesca, a former deputy economy minister who is now head of the Finsoport economic consultancy.
"Argentina will never be able to issue public debt abroad if it continues trying to dodge a settlement," he said. "We can assume Argentina will continue to be financially isolated from the rest of the world as long as this goes on."
The president also said she would send a bill to Argentina's Congress on Tuesday in order to offer remaining holdouts the same terms as the restructured debts.