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ECONOMY | 01-02-2020 08:16

Buenos Aires Province rolls over bondholder deadline until February 3

On the brink of default, provincial government headed by Governor Axel Kicillof extends cut-off for a second time.

The Buenos Aires Province government announced yesterday that the new deadline for accepting delays on capital payments on the BP21 bond (approximately a third of the total US$ 750 million at an interest rate of 10.875 percent) would be extended to 5pm (Western European time) next Monday – the second time it has kicked back the cut-off date.

Factoring in the 10-day grace period included in the original bond contract, the new deadline is effectively February 13.

The proposal to bondholders remains to roll over payments originally due on January 26 to May Day but last Monday Buenos Aires Province Governor Axel Kicillof threw in the sweetener of paying all interest payments due until May 1 in advance and in full.

His hand forced by Economy Minister Martín Guzmán revealing in New York that same day that only 26 percent of creditors had agreed to defer debt repayment until May – when 75 percent is required to avert default – Kicillof made his offer of adva nce i ntere st pay ments (amounting to US$7.2 million) if the bondholders agreed to roll over the capital of around USS 250 million until May.

Bondholders would thus receive US$28.70 for ever y US$1,000 of deferred capital.

But the bid for 75-percent creditor assent remains an uphill task, with few signs of improvement in the figure given by Guzmán at the start of the week. Time is against the provincial government here since the BP21 bondholders are an extremely disperse group with many not even identified.

A provincial default would have a knock-on effect for the national government’s negotiations with the International Monetary Fund involving much larger sums than the US$ 250 million – US$44 billion to the IMF alone and at least US$100 billion to other bondholders under foreign law.

“I think this demonstrates that it’s going to be difficult for Argentina to put a very bad deal on bondholders,” a fund manager investing in Argentine bonds told Reuters yesterday, adding that many felt “in the dark” about what Argentina’s long-term plans were.

Kicillof squarely blames his Cambiemos predecessor María Eugenia Vidal for the increasingly probable default, because even if BP21 was incurred by Peronist governor Daniel Scioli in 2011 (reportedly to grant teachers a substantial pay increase), the former economy minister argues that Vidal ran up levels of debt which complicate any payments now.

Some US$3 billion out of a total of around US$8 billion up for payment during Kicillof’s four-year term falls due this year.

Guzmán and the central government have repeatedly ruled out the possibility of federal aid.

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