Buenos Aires Province is heading for a showdown with bondholders, after new Governor Axel Kicillof warned this week he doesn’t have enough money to meet debt obligations and pay salaries over the next month.
Kicillof, a left-wing economist who gained notoriety earlier this decade when he oversaw the federal government’s contentious negotiations over defaulted bonds, said there were just 25 billion pesos ($417.9 million) in provincial accounts, but that he needs 40 billion pesos to pay debt and salaries over the next 30 to 35 days. Another 50 billion pesos is owed to companies for public infrastructure projects, prisons and other provincial services, he added.
Outgoing officials from the María Eugenia Vidal administration disputed those figures.
“With that debt and those obligations, the figure that’s been spoken of is insufficient,” Kicillof said in a speech from La Plata, the province’s capital. “The province has the willingness to meet its debt commitments, but needs to have a sustainable debt structure.”
Investors have feared the province’s bonds could be the first overseas obligations to default amid a nationwide economic crisis that compelled federal policy makers to warn they will need to restructure debts to push back maturities. President Alberto Fernández also said at his inauguration that the country wants to pay its debt but can’t under current circumstances.
Holders of bonds issued by the province have formed a negotiating group in the midst of the declarations. The committee is being led by Greylock Capital Management, according to people familiar with the matter who asked not to be identified. It hired Mens Sana Advisors and BroadSpan Capital as financial advisers, according to a statement, which didn’t identify a lead creditor. The group is seeking “timely” talks with the province to ensure that interests of bondholders and other key stakeholders are “considered and protected.”
The creditors’ group, which expects to work with provincial Economy Minister Pablo López, doesn’t have a local representative based in Buenos Aires, according to the person familiar with the matter.
Kicillof launched a fierce attack of the Mauricio Macri administration on Tuesday, vowing to “reconstruct” the crisis-stricken region and warning of a food and healthcare emergency.
“Today, I come to commit to working without rest to reconstruct the Province [...] the result shows the most important thing that we have, the popular will,” Kicillof said, citing the electoral spread of 15 points that ushered him into the province’s main executive post.
The swearing in was delayed by one day so that Kicillof could attend the inauguration of Fernández and Fernández de Kirchner in the capital, who returned the favour, travelling to the provincial capital for the event.
“The province has a debt in dollars but also in [terms of] health and education,” he said.
In particular, he referred to the need to “defend public schools, universities, science and investigation.”