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Source: The Economist
Sep 24th 2008
From the Economist Intelligence Unit ViewsWire
Argentina seems ready to address its longstanding problem with "holdouts"
In the midst of deteriorating international economic and financing conditions, Argentina’s government appears ready to address its longstanding problem with so-called holdouts—bondholders who refused to participate in the country’s draconian 2005 foreign-debt restructuring. As long as Argentina doesn’t resolve this problem, it cannot hope to restore its access to international capital markets. Even then, such access at a reasonable cost will not be guaranteed. In the meantime, concerns about the country’s ability to meet its financing needs are growing.
Under the legal provisions of the 2005 debt exchange, those who did not agree to the terms—swapping their bonds for new instruments with a substantially lower value—are ineligible for any other deal. The holdouts have around one-quarter of the US$95bn of bonds on which Argentina defaulted in 2001. They rejected the severe cut in their holdings’ face value, with the new bonds equivalent to between 30 cents on the dollar and 45 cents on the dollar, depending on the valuation of the various options then offered.
