Mary Milliken
Reuters
January 20, 2005

Buenos Aires, Argentina: As hostility to Argentina’s debt swap offer spread from Italy to Germany, Argentina made a rare apology on television to Italian bondholders, most of them pensioners, who bought the country’s bonds before a default three years ago.

“In the name of the government and all Argentines I want to apologize to those who are in this ugly situation for having invested in Argentine bonds,” Finance Secretary Guillermo Nielsen said on prime-time program Mi Manda Raitre late Wednesday.

On a visit to Italy, home to the largest group of individual investors in Argentine bonds, Nielsen has faced raucous protests from pensioners, many of whom invested life savings in the bonds.

“Unfortunately we would like to offer something better, but the Argentine economy is very restricted and we have to stick with this offer, which is the last one,” Nielsen added.

Nielsen’s apology comes after he offended an Italian consumer group that reminded him of the traditional friendly ties between the two countries and the large Argentine population of Italian descent. The group said Nielsen claimed “to have no Italian blood in his veins.”

The biggest sovereign debt restructuring in modern history implies losses for investors of up to 70 percent, or twice the amount of more recent restructurings, and a lengthening of maturities to 40 years.

Since Argentina launched the offer last Friday, Nielsen has concentrated his efforts in Italy, where a total of about 450,000 creditors hold 15 percent of the Argentina’s $102.6 billion of debt in default. Other officials were dispatched to Germany this week, where a big debtholder group signalled Thursday that it might reject the offer.

On a more positive note, Argentina said Thursday that it secured approval for its debt proposal from Japan, the last country to give the green light.

Life savings

Argentina is offering $41.8 billion in new bonds in exchange for the defaulted bonds, and its officials have played hardball with the 500,000 creditors around the world and warned last week that this swap offer is final and will not be improved.

At home, the 12 Argentine pension funds have already signed up for the swap and a pension fund source told Reuters Thursday that 30 percent of creditors are on board since the offer was launched last Friday.

Analysts predict that 70 percent of creditors could accept the offer before it closes on Feb. 25.

In Germany, the advisory board to the Argentine Bond Restructuring Agency, a group of German retail investors, voted unanimously to recommend that ABRA not accept the offer “at this time.”

ABRA said it is the largest single holder of defaulted debt outside Argentina with $1.2 billion in Argentine bonds.

The advisory board said it was concerned that a most favored creditor clause did not offer sufficient protection to investors who accept it.

Argentina’s government has said it will offer nothing to holdouts and that challenges in court to recover investors could be met with countersuits.

Additional reporting by Giada Zampano in Milan and Stella Dawson in Frankfurt.