With the impasse over the latest Argentina default going nowhere fast, late last night president Kirchner stunned its creditors when she announced what amounts to a cramdown plan for holdouts, in which all bonds would be stripped of their existing indentures and converted to local law bonds. Or, as some would call it, a "scorched earth" transaction that burns all bridges, and goodwill, with the international creditor community and likely leaves Argentina unable to access global capital markets for the foreseeable future.
As part of its transaction Argentina would bypass the order issued by Judge Griesa halting payments to all creditors, not just the holdouts, and resume normalcy for the 90%+ of restructured bondholders while leaving Elliott, Aurelius and the like with little to no recourse aside from holding on to claims which would be two swaps behind, and with essentially no legal standing as it would completely bypass the Bank of New York (whom it would remove as trustee) custodian payment process and allow Argentina to make payments directly to those creditors it sees fit.
In essence, what Argentina plans to do is the opposite of what Greece did in 2012 when it defaulted on existing bonds, and swaped over into English-law bonds as an incentive for existing creditors, in effect promising it would never do it again. What Argentina has just shown is how easy it would be to "cramdown" bondholders who thought their "strong" covenants were safe when in reality all it takes is a government order to strip any and all of their indenture protection. Needless to say this has a very negative implication for Argentina's future ability to raise capital in the international arena for the near, and longer-term (at least until the ZIRP yield junkies come crawling back hoping to collect 10% if only for one year; the year after that will be some other Portfolio Manager's problem).