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Finance

Argentina aims to skirt US court's debt ruling

Argentina is looking to sidestep a US court ruling preventing it from paying back some creditors. New legislation foresees repatriating outstanding debt and proposing a bond swap at a national trustee bank.

Argentine President Cristina Fernandez de Kirchner said Tuesday her country would try to send interest payments to some holders of its debt through a trustee bank in Buenos Aires, defying a US court order that had forbidden the government from doing so.

In a televised speech, de Kirchner said the move was intended to protect payments to bondholders who took part in debt swaps in 2005 and 2010.

De Kirchner's plan foresees the state-run Banco Nacion Trust replacing the Bank of New York Mellon, bringing outstanding debt under national jurisdiction and enabling Buenos Aires to pay its creditors domestically.

In July, a US district court judge, Thomas Griesa, ordered a coupon payment to exchange bondholders be frozen at the Bank of New York Mellon.

That ruling stipulated that interest payments to holders of restructured debt could only be paid out if a group of US-based hedge funds also received the money they were owed in full.

The president also invited holdout investors to participate in another planned bond swap.

More than 90 percent of Argentina's creditors already accepted large writedowns in the wake of a national default in 2001. Several hedge funds, including NML Capital and Aurelius, however, are seeking to be paid back in full for bonds they bought.

Argentina rejects hedge funds' claims

"If bondholders decide - in individual or collective form - to ask for a change of the legislation and jurisdiction of their bonds ... the economy ministry is authorized to implement a swap for new public bonds under local legislation," de Kirchner said.

Analysts warn a new bond swap could pose a legal risk as Argentina is already in "technical default," following its failure to pay $539 million (405 million euros) in interest to exchange bondholders in June.

De Kirchner, who has repeatedly described the holdout creditors as "vultures," said she was determined to push the bill through parliament in a vote scheduled for Thursday.

uhe/cjc (Reuters, AFP, dpa)

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