Argentina Launches Its Debt-Restructure Offer

Argentina on Friday launched its historic offer to restructure $102.6 billion in defaulted debt, scoring an early but expected victory as local pension funds holding 17% of the bad debt signed up for the exchange.

Yet foreign creditor groups vowed to resist the offer and began their own counteroffensive in a battle to win the support of undecided bondholders.

After three years in default, President Nestor Kirchner is asking private creditors worldwide to sign up for an offer that amounts to the biggest loss to investors of government debt in modern times. The so-called haircut could be as high as 70%.

Argentina will issue as much as $41.8 billion in new bonds in exchange for the $102.6 billion in bad debt held in at least 10 countries. The main obstacle to success is the Global Committee of Argentina Bondholders, which says its represents $38 billion of the debt in default that won’t be swapped.

Argentina’s 12 private pension funds immediately accepted the swap. They agreed months ago to the offer in previous negotiations with the government.

“The new bonds maintain the value of retirement savings,” said the Union of Pension and Retirement Funds in a statement.

Local retail investors and banks were also signing up Friday, market sources said, but analysts expect other investors to wait and see how much support the offer draws before acting.

The final result will become clearer close to the Feb. 25 deadline. The government will announce the outcome March 18.