BUENOS AIRES (Reuters) - Argentina’s Senate early on Thursday approved a bill aimed at circumventing U.S. court decisions regarding its defaulted debt by changing its payment jurisdiction, passing the proposal to the lower House of Representatives for debate.
The House, like the Senate, is controlled by government allies who are expected to vote the bill into law. The Senate vote approving the measure was 39 to 27.
President Cristina Fernandez wants to resume servicing sovereign bonds that were restructured after Argentina’s previous default in 2002. Her government missed a coupon payment on its restructured bonds in July, thrusting the South American country into default for the second time in 12 years.
The proposed law, saying foreign debt can be paid through intermediaries outside of the United States, is Fernandez’s attempt at getting back on a paying basis by putting government debt out of reach of U.S. courts that have jurisdiction over some of the original bond contracts.
The bill would replace Bank of New York Mellon with state-controlled bank Banco Nacion as intermediary for bond payments. Argentina also aims to swap its bonds issued under foreign jurisdiction for paper governed by Argentine law.
A Manhattan court has banned Argentina from making interest payments on restructured debt until it settles with a group of hedge funds who rejected restructurings in 2005 and 2010 and are suing for full payment.
Those who agreed to the restructurings got less than 30 cents on the dollar while the “holdout” hedge funds sued for full repayment.
The bill is expected to become law before Sept. 30, when the next payment on Argentina’s restructured bonds is due.
Reporting by Hugh Bronstein and Alejandro Lifschitz; Editing by Biju Dwarakanath