Argentina Offers Debt Plan

Argentina’s government on Tuesday announced an offer to restructure about $100 billion of the country’s debt, hoping to regain access to international credit markets and restore investor confidence.

Economy Minister Roberto Lavagna unveiled the proposal several days before Argentine officials were expected to begin a series of meetings with creditors June 7.

“The proposals center on the sustainability” of Argentina’s ability to pay, Lavagna said at a news conference in Buenos Aires.

“We have adopted several suggestions made by the creditors.”

The proposal comes amid protracted talks with private creditors, who have balked at initial government offers for resolving the largest government debt default in history.

The new proposal includes an offer to pay billions of dollars in interest accumulated since the country stopped payment on its obligations more than two years ago.

Argentine officials for months have proposed a 75% reduction on the nominal value of the defaulted bonds -- a proposal angry bondholders have called too extreme.

Many of the bondholders contend the loss would be much greater than other deals offered by Ecuador and Russia after those countries restructured their debt in the 1990s.

Even before the government formally announced its latest offer, the deal was met with criticism by some foreign investors who said they had not been advised a new proposal was in the works.

“We know nothing about this,” said Nicolas Stock, the head of a creditors’ group called the Global Committee of Argentine Bondholders, hours before the announcement. “There have been absolutely no negotiations.”

The group represents investors in Europe, the U.S. and Asia holding more than $37 billion in defaulted Argentine debt.

Foreign investors range from individual investors to investment banks, and Argentines account for the largest group of bondholders, with 38.4% of the total. Italians hold 15.6%, investors based in Switzerland hold 10.3% and U.S. investors hold 9.1%.

Some analysts said the new offer was an improvement over the previous proposal because it included the previously unrecognized interest payments.

Argentina’s economy collapsed in December 2001 amid deadly street riots and supermarket lootings that led to a succession of four presidents in a matter of weeks.

At the time, Argentina defaulted on about $82 billion in bonds and other obligations. Interest payments coming due on the defaulted bonds since have added about $18 billion.

The economy -- South America’s second-largest after Brazil -- has since begun growing again, expanding by 8.7% from last year. But the default has kept many Argentine companies shut out of credit markets, and some economists have warned that growth could slow if the issue isn’t resolved soon.

In March, Argentina signed a pledge with the International Monetary Fund to embark on serious negotiations with creditors as a condition for continuing disbursements of a $13.3-billion loan program the IMF awarded the country last fall.