Buenos Aires Province sued in US for missed debt payments

Holders of bonds from Argentina’s largest province have filed a lawsuit in New York for over US$30 million in unpaid principal and interest.

Creditors submitted a legal claim against the province of Buenos Aires in the USDistrict Court for the Southern District of New York on Tuesday after negotiations to restructure US$7.1 billion in overseas debt stalled, according to a statement from the Steering Committee of the Ad Hoc Group of Bondholders, which holds more than half the outstanding bonds.

The plan comes after a lack of progress in restructuring talks between the province and investors, over six months after the federal government struck a deal to restructure US$65 billion in sovereign bonds. The province published details of a new proposal shown to one of its largest creditors, GoldenTree Asset Management, on Monday, but the fund rejected the terms and the province didn’t accept a counteroffer that followed.

“Since April, the Province has made virtually no effort to engage in good faith negotiations with the Group to find a mutually agreeable and consensual solution, despite several attempts at engagement by the Group and its advisors,” according to the press statement. “Actions speak louder than words, and it is regrettable that the Provincial leadership has chosen to follow a course of confrontation and default.”

The court complaint states that the plaintiffs own beneficial interests totalling about US$204.8 million of aggregate principal amount outstanding under the notes. According to the complaint, the unpaid interest is currently US$9.9 million and the unpaid principal is US$20.4 million.

The press office for the province of Buenos Aires’ economy ministry did not immediately reply to a request for comment. Buenos Aires has extended the deadline for creditors to accept its proposals more than a dozen times since its first offer appeared in April.

A half-dozen other provinces, from Salta in the north to Neuquén in the south, have sealed restructuring deals over the past year amid an economic and currency crisis exacerbated by the pandemic.

The Ad Hoc group said in January it was considering “available remedies” for its investments. The group includes funds such as GoldenTree and VR Advisory Services Ltd.

A long road

Home to about 40 percent of the nation’s population, the province kicked off its debt restructuring process in January 2020 when Governor Axel Kicillof first said he would delay a US$250-million capital payment. He ended up transferring the money anyway.

Months later, the province proposed a fresh restructuring offer that was again rejected by creditors, and rating companies cut the province to selective default after it missed a payment in May.

“The members of the Group who have today filed claims remain open to considering proposals from the Province that fairly reflect the reality of the Province’s financial and economic position,” according to the statement. “In the meantime, they intend to vigorously pursue the legal proceedings that they have initiated today, and reserve in full their right to exercise additional available remedies at any time.”

This is not the first legal claim against an Argentine province. In January, Entre Ríos Province was sued for a missed interest payment in New York court, but bondholders said they would drop the legal claim after reaching a deal.