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Argentina proposes voluntary debt swap to side-step US court ruling

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Argentina proposes voluntary debt swap to side-step US court ruling

Embattled Argentina has announced plans to launch a voluntary debt swap to avoid a US court ruling that triggered a debt default.

The government is seeking approval from congress for plans that would allow it to service debt in Argentina as well as allowing bondholders to exchange their debt issued under foreign law for bonds of the same value that are governed by local law, according to the Financial Times.

Under the proposals president Cristina Fernández said Argentina would stop using Bank of New York Mellon as a trustee, alternatively make payments on its bonds via an account at Banco de la Nación in Buenos Aires. This is because the default was caused by a US judge preventing BNY Mellon from transferring $539 million to bondholders in July.

The US Supreme Court upheld the judge’s ruling that Argentina must pay 'holdout creditors'in full, at the same time as paying the rest of its bondholders who accepted a 65%haircut on their bonds after the 2001 default.

The Financial Times reported the swap will be voluntary and the government will also deposit funds for the holdouts under the terms of the 2010 debt restructuring.

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