The Buenos Aires Province government today extended an expiring deadline for creditors to decide on its request to delay a key bond payment.
Bondholders now have until 9am local time on January 31 to accept the province’s plan to push back a US$250-million principal payment, according to a statement. That is within the 10-day grace period the province has from the date the payment is due on January 26 to avoid default.
Bonds in the province tumbled Wednesday. The notes due 2021 dropped four cents to trade as low as 52.9 cents on the dollar as a result of the move. Sovereign debt followed suit, with Argentina's famed century bond due 2117 declining 1.2 cents to 44 cents.
Governor Axel Kicillof surprised investors January 14 by proposing the delay, which doesn’t include a sweetener, after the federal government said it wouldn’t offer the province a bailout. The province is not planning to change the terms of the proposal beyond extending the deadline for creditors, an official from the province said.
The province’s Economy Minister Pablo López said in an emailed statement that talks with investors would continue, and that the proposal has “significant” support. Holders of at least 75 percent of the bond’s principal must back the plan for it to win approval.
A creditor group representing investors yesterday abstained from making a recommendation on a provincial plan to push the payment to May 1, while the payment of interest for some US$27 million was ratified for next Monday. They did note however that the plan was made in “a truncated time frame, without the benefit of a formal bondholder identification process, and in the absence of a comprehensive plan for the Province’s debt,” according to a statement sent after hours Tuesday.
Its statement added that it was willing to enter good faith negotiations with the province “on the basis of a sound and comprehensive economic plan.”
Holders of at least 75 percent of the bond’s principal must voice their support for the plan for it to win approval.
Finance Minister Pablo López declared: "To date we have received the support of a significant number of bondholders, and we continue in dialogue with institutional investors whose participation would allow us to reach the desired result," López said in a statement.
"In order for the process to recover the sustainability of the provincial debt to continue in an orderly manner, and considering all our creditors, we consider this to be a fundamental step. For this reason, and given that the situation of the Province has not changed, we have decided to use all the time at our disposal to achieve the necessary understanding of the creditors to postpone the payment of capital," the official added.
Kicillof is strongly aligned with the ruling administration and his treatment of creditors is seen as indicative of what investors can expect from President Alberto Fernández as he seeks debt relief for the country.
The province has said it was asking for the timeline extension so creditors could participate in wider talks led by the national government.
“In such a short time frame, with a bond scattered among many investors, and in the absence of a comprehensive plan, it is challenging to obtain the necessary consents,” Marcelo Delmar, one of the financial advisers for the bondholder group, said by phone.