UPDATE 3-Argentina seeks deal with bond 'holdouts'

By Damian Wroclavsky

BUENOS AIRES, Sept 17 (Reuters) - Argentina is seeking to reach an agreement with bondholders who rejected a 2005 debt restructuring, a copy of the 2010 budget showed on Thursday in the latest sign the government wants to repair its relationship with creditors.

The reference in the budget did not provide details or a timetable for any deal. But it comes as Economy Minister Amado Boudou has said the country wants to return to global markets.

Argentina defaulted on some $100 billion in debt in 2002 at the height of an economic crisis. The government restructured the debt three years later, offering very low returns to creditors and nearly one-quarter of them rejected the deal.

The South American country has largely been shut out of global markets since then because of fallout from the restructuring.

'We expect to keep advancing in the process of regularizing the debt with multilateral credit organizations and private creditors that didn't enter the 2005 swap,' a detailed copy of the bill said.

Argentina's ability to tap international credit markets is also being hampered by its failure to resolve some $6.7 billion it defaulted debt it owes to the Paris Club of wealthy creditor nations.

The bondholder 'holdouts' own about $29 billion in defaulted bonds, including past-due interest, according to government figures.

Analysts welcomed the debt restructuring mention in the budget.

'This is by far the strongest signal Argentina has sent to markets recently that it really intends to address the situation with the holdouts,' said Carola Sandy, an economic analyst for Argentina at Credit Suisse in New York.

In recent months, the government has carried out a series of bond swaps, including an exchange of inflation-indexed paper, provoking some investor optimism and sparking a recent rally in Argentine debt.

Argentina's country risk, measured as the spread between its benchmark bonds and comparable U.S. Treasuries, has also declined sharply, according to the J.P. Morgan Emerging Markets Bonds Index and hit its lowest levels in 12 months earlier this week.



RETURN TO MARKETS

The rally in bond prices has also helped fueled speculation Latin America's No. 3 economy would return to international capital markets in coming months with a new global issue. Argentina faces about $13 billion in financing needs next year.

'There is a very good chance Argentina will come to markets with a new bond early in 2010. But before Argentina gets to that point, it will have to clear the pending situation with the holdouts first,' Sandy said.

President Cristina Fernandez considered a deal with bondholders last year, but the global economic crisis and political uncertainty at home forced her to abandon the plan.

A copy of the budget bill, posted on the website of the Argentine Congress, also offered more details on the government's economic outlook for next year.

According to the budget the government's forecast for economic growth this year was slashed to 0.5 percent from 4.0 percent.

Also, the budget bill expects a 16.2 percent rise in tax revenues in 2010 versus 2009 and a 2010 trade surplus of $14.18 billion, while export taxes are seen increasing 34.6 percent next year, the bill showed.

(Writing by Kevin Gray; Editing by Kenneth Barry) Keywords: ARGENTINA BUDGET/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.