By Karin Strohecker
LONDON, Aug 29 (Reuters) - Argentina's international dollar bonds fell to new record lows on Thursday and its debt-insurance costs rocketed after the government announced plans to "reprofile" some debt, leaving investors scrambling to assess what kind of hit they might face.
The recession- and inflation-racked economy has struggled for years with debt problems. Its latest woes began when business-friendly President Mauricio Macri suffered an unexpected and crushing defeat in an Aug. 11 primary election at the hands of populist-leaning Peronist Alberto Fernandez.
That unnerved investors, who feared the return of the left to power could herald another debt restructuring in Latin America's third-largest economy.
Treasury Minister Hernan Lacunza told a news conference on Wednesday that the government wanted to extend the maturities of short-term local debt instruments and would negotiate with holders of its sovereign bonds and with the International Monetary Fund.
This would first apply to short-dated debt denominated in pesos as well as dollars but issued under local law, Lacunza said. The measure will require approval from Congress.
The news put more selling pressure in early European trade on Argentina's dollar-denominated bonds issued under foreign law.
The issue maturing in 2028 dropped around a cent to a low of 42 cents in the dollar.
Argentina's century bond, issued in 2017, traded at a record low of 43.25 cents after slumping 4 cents on Wednesday. It has lost more than 30 cents since the Aug 11 primary election.
On Wednesday, Argentina's international bonds maturing between 2020 and 2027 - perceived to be more vulnerable to a possible overhaul in debt - dropped between 5-8 cents in price after Lacunza's announcement.
Its dollar-denominated but locally listed October 2020 bond, the immediate focus of Buenos Aires' overhaul plans, tumbled as much as 23 cents on Wednesday. It was yet to trade on Thursday.
While markets understood the immediate action to be targeting short-term domestic sovereign debt denominated in dollars or Argentinian peso, it was still unclear exactly how international investors might be affected.
Some investors welcomed Argentina's efforts to tackle its debt burden.
"They haven't got the money, so some adjustment is necessary," said Abhishek Kumar, lead emerging markets portfolio manager at State Street Global Advisors.
"The measures they take are still unknown, but anything is good because it realigns to the reality."