The markets continue to view sceptically the Buenos Aires provincial government’s bid to roll over its debt payment on the Bono 2021 bond with country risk topping 2,000 points (closing the week at 2,068 points), while the MerVal stock market index dipped 1.63 percent yesterday.
The official exchange rate at Banco Nación remained constant at 58 pesos (buy) and 63 pesos (sell) but parallel exchange rates reached as high as 83.76 pesos with travellers needing to shell out 81.90 pesos per greenback including tax.
Meanwhile, Buenos Aires Province Governor Axel Kicillof continued to play for time over the Bono 2021 payments but on a short fuse. As the first deadline for obtaining creditor assent to delaying repayment (originally scheduled for tomorrow) expired last Wednesday, he rolled it over to the end of the month next Friday (within the 10-day grace period permitted by the bond terms) – yesterday he tacked on a few more days by saying that February 5 was the “last chance” for bondholders to accept a postponement.
Kicillof spoke of “some” bondholders accepting the postponement of repayment until May Day but also warned holdouts that “today we are not in a position to pay” since provincial funds do not suffice and “we are looking for a solution that does not mean impacting other needs,” as he told Radio La Red in an interview after returning from Israel.
To sweeten the delay, Kicillof and other provincial officials assured creditors that they would face no haircut since there were no plans to change the terms of the proposal beyond extending the deadline. At least 75 percent of the creditors must accept the delay if default is to be avoided.
Meanwhile, Economy Minister Martín Guzmán continued to rule out any national bailout to supplement insufficient provincial funds, although he also defended Kicillof’s decision to delay a relatively minor payment (in global financial terms) of US$250-million by saying that it needed to fit into a broader restructuring of debt.
President Alberto Fernández does not expect to complete the negotiations for that restructuring with the International Monetary Fund before late March.
Along similar lines the province argues that it is seeking the extension so that creditors could participate in wider talks led by the national government.
ARBA provincial tax bureau chief Cristian Girard yesterday confirmed Kicillof’s words about some bondholders accepting his proposal, expressing optimism as to a successful outcome while underlining that the province was in a “critical situation” making rescheduling an absolute necessity.
Earlier in the week Buenos Aires Province Finance Minister Pablo López upped the number of bondholders accepting the proposed delay to “significant.”
But other observers were less optimistic.
“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 consent,” Marcelo Delmar, one of the financial advisers for the bondholder group, observed.
Kicillof also used his Radio La Red interview to renew criticism of his predecessor, María Eugenia Vidal, and the level of debt both the province and the nation as a whole took on, saying attempts to restructure the debt did not work and adding that 82 percent of his province’s debt was dollar-denominated.
The governor quantifies the payments falling due this year at almost US$3 billion out of a total of over US$8 billion due by the time his term ends in late 2023. National debt as a whole totals US$ 335 billion or 93 percent of gross domestic product.
The governor was not around after midweek – Kicillof, who is of Jewish descent, accompanied President Fernández on his first official trip abroad to Israel to mark International Holocaust Day and the 75th anniversary of the liberation of Auschwitz concentration camp.