Argentina to pay $500 million to resolve disputes with foreign firms

Reuters – 17 hours ago

  • View PhotoArgentina's Economy Minister Hernan Lorenzino leaves the U.S. Appeals Court in New York February 27, 2013. REUTERS/Andrew Burton

BUENOS AIRES (Reuters) - Argentina said on Friday it had agreed to pay about $500 million (309.2 million pounds) to resolve disputes with several European and U.S. corporations as it seeks to rebuild foreign investor confidence amid a bitter court dispute with some bondholders.
The payment will be made in sovereign bonds to four companies that filed complaints at the World Bank's International Centre for Settlement of Investment Disputes and one firm that took its case to the U.N. Commission on International Trade Law, a government statement said Friday.
Five agreements were signed with the companies, which agreed to a 25 percent discount on a total $677 million in claims, a communiqué from Argentina's economy ministry said.
The decision coincides with a sensitive time in the South American country's battle in U.S. courts with hedge funds that refused to take part in two debt restructurings following Argentina's 2002 default.
Argentina hopes the Obama administration will ask the U.S. Solicitor General to present arguments to the U.S. Supreme Court on whether the case merits the court's attention after a lower court ruled in favour of bondholders who will not accept reduced payments under a restructuring agreement.
The country is also looking to present its best face in order to help unlock additional credit lines from the World Bank, International Monetary Fund and People's Bank of China in order to support its dwindling foreign currency reserves.
Companies to be paid in the settlement include France's Vivendi SA (PAR:VIV), U.S.- based water company Azurix and Blue Ridge Investments, a subsidiary of Bank of America Corp (NYS:BAC).
Other companies include CC-WB Holdings LLC, which holds the rights to claims made by Continental Casualty Company, a unit of Chicago-based CNA Financial Corp (NYS:CNA), and NG-UN Holdings LLC, which holds rights to claims by British electric and gas utility National Grid PLC (LSE:NG.) at the U.N. commission.
Under the terms of the deal, the firms reduced the amount of compensation they were seeking by 25 percent.
"The proposals consist of the cancellation of those claims exclusively with public debt, for amounts which represent ... a significant discount on the requested sums and a reasonable period for repayment," said the government statement.
Argentina's government will pay the compensation in U.S. dollar-denominated bonds known as Boden 2015 and Bonar X, which offer a 7 percent annual interest rate.
Neither the government statement, issued as an "administrative decision" by the Cabinet chief, nor the economy ministry communiqué specified the amounts to be paid to each of the companies cited.
Economy Minister Hernan Lorenzino said the compensation will be paid with sovereign bonds governed by Argentine law. He said
the deal should pave the way for the country to receive about $3 billion in World Bank loans over the years ahead.
Argentina faces additional complaints at the World Bank body, including a claim by Spanish oil firm Repsol SA (MCE:REP) over the expropriation of its stake in Argentine state-owned oil company YPF SA (BUE:YPFD) last year. Repsol has said the value of its stake was about $10 billion, but the company has not yet disclosed the size of the claim it will make at the arbitration panel.
In May 2012, the United States suspended Argentina from the U.S. Generalized System of Preferences program, which waives import duties on certain goods from developing countries, after the South American nation failed to pay compensation awards in disputes involving Azurix and Blue Ridge Investments. It was the first time a country had been suspended from the program for failing to pay an arbitration award.
The United States imported $477 million worth of goods from Argentina under the program in 2011, which was about 11 percent of total U.S. imports from the country that year.