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. Last Updated: 07/27/2016

Argentina Unveils Offer to Cover $100Bln Debt

BUENOS AIRES, Argentina -- Argentina unveiled on Monday its offer to restructure a world-record $100 billion in defaulted sovereign debt, adding a few incentives to assuage angry creditors who could enter the swap as early as Nov. 29.

Economy Minister Roberto Lavagna told reporters that Argentina will issue up to $41.8 billion in new bonds in exchange for the approximately $100 billion in default, once the swap is completed on Jan. 17, 2005.

The restructuring plan, which follows two draft proposals announced by the government in June and September of last year, would represent the biggest sovereign debt write-off in history. Argentina defaulted on its debt in January 2002, at the height of a crippling economic crisis.

"It doesn't strike me that this is an attractive deal. It certainly is far below the general consensus of what Argentina has the capacity to pay," said Hans Humes, co-chairman of the Global Committee of Argentina Bondholders, which says it represents holders of about $37 billion in defaulted debt.

Many creditors have clamored for better terms since the government announced the broad outlines of its restructure proposal last year.

Officials said Monday that Argentina will issue three new bonds: par, quasi-par and discount. The discount bonds will include a face-value reduction of 66.3 percent, while quasi-par bonds will drop 30.1 percent.

The nominal issue date of the three new bonds was moved back six months to Dec. 31, 2003, which means that $1 billion in interest payments will be immediately owed to bondholders upon completion of the swap.

If gross domestic product growth surpasses 3 percent, the Argentine government pledges to pay an amount equal to 5 percent of the additional growth in interest bonuses to bondholders and another 5 percent to buy back debt.

On Monday, Argentina submitted its debt restructure offer to the U.S. Securities and Exchange Commission because all securities sold in the United States must be registered with that body.

Once the SEC gives the go-ahead, Argentina will work to convince bondholders to participate in the swap.

"It is largely in line with what bondholders were expecting. It is a little bit better than the original offer and it has got bonds trading up today," said Christian Stracke, lead emerging markets analyst at Creditsights, a Wall Street research firm.

"But the same problems remain. The core of this offer is not a very generous offer, which tries to extract debt forgiveness from bondholders," Stracke said.