Buenos Aires Province asks to delay debt payment

Buenos Aires Province asked bondholders of its 2021 notes to delay a principal payment due later this month as Argentine issuers look to ease a debt burden and kick off talks with creditors under the new administration of Alberto Fernández.

The province run by Governor Axel Kicillof, Argentina’s largest, said that by January 22 at least 75 percent of bondholders will have to accept the proposal to push a January 26 principal payment to May 1 in order to change the terms of the notes, according to a filing.

The local government owes about US$250 million of principal on the 2021 securities later this month.

The uncertainty over whether the province will make the payment has whiplashed bondholders in recent days, with the price swinging between 60 cents and 69 cents on the dollar. Just on Monday, the bonds fell 9 cents after the country’s Economy Minister Martín Guzmán said the government won’t bail out the province. President Fernández repeated those comments late Monday.

The debt payment of Buenos Aires Province is a first test to see how the government will handle looming maturities. The government has asked for proposals from creditors and advisers on how to make its debt load sustainable and will seek to alter a record US$56-billion agreement with the International Monetary Fund.

The implied probability of non-payment by the government of Argentina over the next 12 months stands at 74%, according to credit-default swap data provided by CMA.