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ECONOMY | 09-04-2024 16:47

Argentina’s La Rioja creditors gear up for battle on missed bond payment

Creditors of Argentina’s La Rioja Province tapped advisers ahead of potential debt talks as they quibble with officials over more than US$16 million in bond payments. 

Creditors of Argentina’s La Rioja Province tapped advisers ahead of potential debt talks as they quibble with officials over more than US$16 million in bond payments. 

Holders of the notes due in 2028 hired Quinn Emanuel Urquhart & Sullivan, LLP as counsel and requested La Rioja makes good on its obligation by next week, according to a statement from a committee of creditors. A counter-proposal made by the province was already rejected, a spokesperson for the committee said, without giving further details.

The cash-strapped province missed a US$15.9-million principal bond payment on February 24. It then paid US$10.4 million in interest in late March — though US$500,000 was retained by the bond trustee. The creditors are demanding the balances of each. 

A spokesperson for La Rioja Province’s governor didn’t respond to a request for comment. BNY Mellon, the trustee, declined to comment. 

Tucked in Argentina’s northwest and home to some 385,000 inhabitants, La Rioja is among several provinces that have been affected by President Javier Milei’s cuts in federal aid to state governments as part of a “shock therapy” process he says is needed to put the economy back on track after decades of mismanagement. 

His policies have unleashed economic pain as he devalued the peso, announced plans to terminate 70,000 state jobs and done away with price controls. La Rioja’s governor has blamed Milei’s austerity plan for forcing him to freeze civil servants’ salaries. 

The country’s economy is seen contracting 3.5 percent in 2024, according to the Central Bank’s monthly survey published Monday.

“As it concerns provinces, some names are better equipped than others to weather the decline in central government transfers, both discretionary and funds allocated to public works,” said Ramiro Blazquez, head of research at BancTrust & Co.

The lack of clarity on money flows has dented the reputation of provincial bonds as a sort of haven for money managers who want to invest in the country while avoiding the risk of carrying sovereign debt that’s been marred by myriad defaults.

They’ve largely missed out on the massive rally in Argentina debt since Milei took office in December. La Rioja’s notes due in 2028 dropped about four cents to trade at 54 cents on the dollar over that period, according to indicative pricing compiled by Bloomberg. Sovereign bonds due 2030, meanwhile, have soared more than 19 cents during the span.  

 

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by Kevin Simauchi, Bloomberg

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