Argentina’s debt-restructuring accord this month was a benchmark for provinces renegotiating their own bonds – setting a minimum, not a maximum for what investors can expect.
Provincial governments are coming up with more generous proposals for their creditors than the one agreed between the sovereign and its bondholders. One reason why valuations are higher is that most provinces have less debt maturing in the short term.
While most negotiations are at an advanced stage, regional governments are still waiting for the green light from President Alberto Fernández’s administration, which wants Buenos Aires Province to be the first to close a deal. The strategy: to prevent talks elsewhere from encouraging creditors to demand better terms from the nation’s largest province.
“The sovereign agreement set the precedent and is positive, but the provinces will not follow the same steps,” says Ursula Cassinerio, a sub-sovereign analyst at Moody’s Investors Service in Buenos Aires. “Their proposals are friendlier and their debt processes will be shorter.”
Buenos Aires Province, which resumed talks with creditors last week, is negotiating a deal under which bonds will have a net present value three to seven points higher than the sovereign notes, which were valued at almost 55 cents on the dollar in the debt-restructuring accord. The deadline for accepting the last proposal expires on August 14, but it will probably be extended once again, according to people with direct knowledge of the talks.
The province of Mendoza, which missed a payment on bonds due in 2024, started talks with creditors to restructure US$500-million worth of overseas debt. The latest exchange offer, presented on July 6, has a net present value of 80 cents on the dollar at an exit rate of 10 percent, and will expire on August 28. So far, holders of almost 60 percent of the securities gave consent to the offer. The province needs to reach 75 percent to avoid litigation.
Río Negro, which is in default after missing a coupon payment on bonds due in 2025 in early July, is offering a net present value of close to 73 cents on the dollar at an exit rate of 11 percent, according to a person familiar with the matter. While talks should be easier because two creditors hold 50 percent of the debt, the negotiation was put on hold at the request of the national government, the person said.
Córdoba Province hasn’t missed bond payments yet, but it has hired JPMorgan Chase & Co, HSBC Holdings Plc and the law firm Shearman & Sterling LLP to design a strategy to refinance its debt. The province’s next bond payment is on June 2021, amounting to US$725 million in principal.
The province of Neuquén is in talks with Citigroup Inc and its longtime adviser Quantum Finanzas SA to refinance approximately US$704 million in overseas debt. Its latest proposal includes a request for consent to extend capital maturities and cut coupons without a capital reduction. A group of creditors rejected the offer, but said in a statement they remain open to talks with the province.
Salta is in talks with creditors to restructure US$380 million and is being advised by Bank of America Corp and Banco Macro SA. Last month, it took advantage of the grace period for its foreign bonds maturing in 2024 to work on a proposal that would ease its financial obligations in the short term and achieve debt sustainability conditions, the province said.
The province of Entre Ríos hired HSBC to restructure its overseas debt after missing a coupon payment on August 8. The first principal payment is in 2023.
The province of Chubut received approval from the local congress on August 6 to renegotiate its overseas debt. Officials had already hired UBS Group AG as an adviser ahead of a possible negotiation. The province, which has US$650 million of overseas bonds that are guaranteed by oil and gas royalties, has a payment coming due in October.
by Ignacio Olivera Doll, Bloomberg