UPDATE 2-Argentina flirts with debt swap as fear of default rises

martes 17 de junio de 2014 20:29 GYT

(Adds quotes from Kicillof, analyst)

By Sarah Marsh and Alexandra Ulmer

BUENOS AIRES, June 17 (Reuters) - Argentina is taking steps to place its restructured debt under local law so it can continue making payments despite a string of adverse U.S. court rulings, Economy Minister Axel Kicillof said on Tuesday as fears of default increased.

Under the move, Argentina would swap bonds that are governed by U.S. law for those governed by Argentine law, meaning they would no longer be subject to the U.S. courts.

"We cannot allow (holdouts) to prevent us from honoring our commitments to creditors," Kicillof told a news conference. "For this reason we are starting the steps to start a debt swap to pay them in Argentina under Argentine law."

The U.S. Supreme Court declined on Monday to hear an appeal by Argentina in its decade-long battle against hedge funds who refused to take part in its debt restructuring after its catastrophic 2001-02 default.

This left a lower court ruling intact ordering it to pay them $1.33 billion, something Argentina has vowed not to do.

It also set the clock ticking ahead of June 30, when the government is due to service restructured bonds. If a resolution is not found before then, Argentina would be barred by the U.S. court decision from making the payment, pushing the country into technical default 12 years after its devastating debt crisis.

Analysts said a new swap into locally governed bonds was a risky move that could also result in a technical default if Argentina did not manage to implement it before the end of the month or in the likely event that some investors refuse it.   Continuación...