(Adds opposition lawmakers' views, context)
By Alejandro Lifschitz and Hugh Bronstein
BUENOS AIRES, Sept 11 (Reuters) - Argentina's Congress on
Thursday overwhelmingly passed a debt bill aimed at defying a
U.S. court ruling which tipped the country into default for the
second time in 12 years.
After an overnight debate, the lower house of the
legislature passed the bill which authorizes the government to
circumvent the U.S. court and ensure bondholders receive
upcoming interest payments on an estimated $29 billion in bonds,
on which the country defaulted in July.
Government allies brushed aside opposition arguments that
the bill would be ineffective because it failed to meet a key
requirement of the original bond contracts. The bill now goes to
President Cristina Fernandez for signature.
Under the law, Argentina could make payments on its
foreign-held bonds locally or elsewhere beyond the reaches of
the U.S. court. It also encourages investors to move their
Argentine debt from the United States or other foreign
jurisdictions to either Argentina or France via an exchange of
debt.
Argentina fell into default in July after U.S. District
Judge Thomas Griesa in New York barred the Bank of New York
Mellon from transferring a coupon payment to bondholders
unless the government settled with a group of hedge fund
plaintiffs at the same time.
The ruling affected debt restructured under foreign law
after Argentina's $100 billion default in 2002.
Griesa has called the plan to circumvent his court illegal.
Economy Minister Axel Kicillof acknowledged in Congress on
Tuesday that creditors had little appetite for the plan, which
allows a unit of state-owned Banco Nacion to replace BONY
Mellon as the conduit for payments.
Alejo Costa, chief strategist at local investment bank
Puente, said he did not expect many creditors to shift their
Argentine debt.
"The government will at least send the signal they want,"
Costa said. "In their view, they're doing what they can to make
the payment."
The government is in a race against the clock to make a $200
million coupon interest payment due Sept. 30 on its restructured
bonds. It needs an intermediary bank outside Griesa's
jurisdiction by which it can deposit the money.
The lower house of Congress passed the bill 134-99 early
Thursday morning after a marathon debate that started Wednesday
afternoon. The Senate had already approved the proposal last
week.
Argentine President Cristina Fernandez has called the hedge
fund creditors "vultures" and accused Griesa of interfering in
her nation's national sovereignty. She announced the new debt
bill last month to get around his ruling.
If creditors refuse to participate in plan, the government
can under the new law try to replace the Bank of New York Mellon
Corp, the trustee for bond payments, with Nacion
Fideicomisos, a unit of state-controlled Banco Nacion. That way,
it can service its debt locally.
But skepticism over this part of the plan is growing, too.
Kicillof told lawmakers on Tuesday that the government was open
to suggestions from bondholders about where to make payments if
they were unhappy with its proposal.
Opposition lawmakers said the bill will do nothing to
resolve the legal imbroglio because any trustee must have a
Corporate Trust Office in New York's Manhattan borough and be
conducting business under the laws of the United States.
Nacion Fideicomisos' legal address is in central Buenos
Aires and its website shows no indication of a presence in New
York.
"The bill does not fit with the bond contracts," said Mario
Negri, head of the opposition Radical civic Union party.
(Additional reporting by Sarah Marsh; Editing by Toby Chopra,
Sonya Hepinstall and Lisa Von Ahn)
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