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Last Updated: Saturday, 26 February, 2005, 01:15 GMT
Argentina closes $102.6bn debt swap
A successful debt-swap could boost Argentina's economy
Argentina closed its $102.6bn (53.51bn) debt restructuring offer for bondholders late on Friday, with the government hopeful that most creditors would accept the deal.

The estimated loss to bondholders is up to 70% of the original value of the bonds, yet the majority are expected to accept the government's offer.

Argentina defaulted on its debt three years ago, the biggest sovereign default in modern history.

On Thursday Argentina's economy minister, Roberto Lavagna, said that he estimated that the results of the restructuring would be ready around next Thursday (3 March).

Rational exuberance?

Argentina's President, Nestor Kirchner, said on Friday: "A year ago when we started the swap (negotiations), they told us we were crazy, that we were irrational."

But he added that his government was close to achieving: "The best debt renegotiation in history."

Argentina's stock market rose 4.6% on Friday to close at a record high of 1,600.

About 70% to 80% of bondholders are expected to accept the terms of the offer.

Vladimir Werning, a vice president at JP Morgan, said he wouldn't be surprised if the acceptance rate was 80%.

Resumption of talks

The country has been in default on the $102.6bn - based on an original debt of $81.8bn plus interest - for the past three years.

The government must now plan its post-swap agenda and resume talks with the International Monetary Fund. It will also face some legal challenges from investors who rejected the swap.

By 18 February, creditors holding $41bn - or 40% of the total debt - had accepted the offer.

Sorting out its debt would enhance the country's credibility on international markets and enable it to attract more foreign investment.

Of Argentina's bondholders, 38.4% reside in Argentina, 15.6% in Italy, 10.3% in Switzerland, 9.1% in the United States, 5.1% in Germany and 3.1% in Japan.

Investors in the UK, Holland and Luxembourg have about 1% each and the remainder were not broken down by country.

The deal is likely to be taken up most enthusiastically by domestic investors, who will benefit if Argentina's economy becomes more stable.

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