Argentina's Creditors not in Favor of Debt Swap

Financial Times - Bondholders Snub Debt-for-Equity Proposals
Bloomberg - Lousteau Proposes Deal on Defaulted Argentine Debt, Nacion Says


A group of creditors holding more than $20 billion of bonds that Argentina defaulted on in 2001 reacted negatively to ideas of exchanging the bonds for equity to invest in Argentine industry or infrastructure. The group of creditors, The American Task Force Argentina, dissented from the Argentina debt restructuring in 2005 and therefore still hold the defaulted Argentine bonds.

The potential swap was floated by an Argentine economist through channels at the Inter-American Development Bank and the incoming Argentine economic minister was reported to be considering such a plan. In 2005, when Argentina restructured its debt, many holders of over $62 billion in defaulted bonds received less than 25 cents on the dollar. In addition to the group of creditors holding the $20 billion in bonds, Argentina is also seeking to come to an agreement with the Paris group of creditor nations, holding around $6 billion in defaulted debt.

The incoming economy minister under new President Cristina Fernandez, Martin Lousteau, is also reportedly considering proposals to tie the Argentina peso to a greater number of currencies. Such a move might cause the peso to depreciate against the dollar, going against the economic policies of outgoing President Nestor Kirchner. Kirchner favored a weak peso to make exports more attractive, and sought to maintain a 3-1 peso to dollar exchange rate.


Discussion:
1. What are realistic options for the group of hold-out creditors still holding defaulted Argentine bonds, and how much of a loss of face value should they be prepared to sustain?