A newly proposed Argentine bankruptcy law aimed at helping ailing companies may actually exacerbate investor losses on Argentine bonds, sources say.

In an attempt to save struggling companies, the government is desperately searching for a resolution to prevent an overflow of bankruptcies. The latest proposed solution is a new bankruptcy law, which, if passed, will provide banks with a 90-day period to restructure loans held with all debtors, through an agreement with each of them. The rescheduling will provide terms based on the new currency-exchange conditions and the debtors' cash flow. If at the end of this term no agreement is reached, the financial institution must make provisions for 100% of the debtor's loan.

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