Buenos Aires Province has improved the terms it’s offering bondholders if they agree to accept delayed payments, an about-face from the cash-strapped government after its first overture failed to attract sufficient support.
In exchange for pushing back the deadline on a US$250-million principal payment, investors would get paid interest on those funds, according to the offer revealed Monday. Previously, officials were asking creditors to sign off on the three-month delay without any additional compensation.
Argentina’s largest province surprised creditors earlier this month when it said it didn’t have the money to make the payment due January 26 and asked for a delay until May 1 to avoid a hard default. Officials then extended the deadline to accept the proposal to January 31 after failing to win enough bondholder support. Investors with 75% percent of the notes’ face value need to agree to the deal for it to take effect.
“This is constructive news,” said Michael J. Roche, an emerging-market fixed-income strategist at Seaport Global Holdings in New York. “It’s still a negotiation with time left to its expiry, so it is possible we’ll see further amendments in order to get over the 75 percent” threshold.
The bonds have tumbled 17 cents since the province announced that it couldn’t make the payment, turning what had been one of the world’s best bonds for a time into one of the worst. The notes slipped 0.9 cent Monday to 52 cents on the dollar.
The province said the interest payment would amount to about US$28.70 per US$1,000 of the deferred principal amount, and said it would distribute the money five business days after an agreement is reached.
“The province recognises that it’s making an exceptional request,” it said in a statement.
The proposal from Buenos Aires comes as the national government is also opening talks with creditors and the International Monetary Fund as it seeks debt relief amid an economic crisis that sent the currency tumbling.