Argentina’s province of Entre Rios bond talks yield proposal, counter

By Wendy Van Sickle

Columbus, Ohio, Dec. 31 – An ad hoc group of holders of Argentina’s province of Entre Rios’ bonds rejected the terms of the province’s latest proposal to restructure its $500 million outstanding 8¾% notes due 2025 and delivered a counterproposal, according to a news release from the bondholder group on Thursday.

The bondholder group, which comprises institutional investors holding in excess of 60% of the notes, concluded a month-long series of restricted discussions with the province in an effort to negotiate a resolution to a default under the notes, according to the release.

In the latest round of talks, which ended Tuesday, the province presented an amended proposal to restructure the notes. The bondholder group said it “rejected the terms of the latest proposal as being unjustified by the province’s current economic and fiscal realities.”

The group’s counterproposal would extend the notes until 2028, as well as extending the amortization schedule and providing a call option exercisable at any time after the original maturity date of Feb. 8, 2025.

Under the counterproposal, bondholders would be invited to exchange their 2025 notes for a like principal amount of notes due Feb. 8, 2028, which would amortize in 11 equal semiannual installments, starting Feb. 8, 2023.

The news notes would bear annual interest of 5% initially, stepping up to 8¾% on Aug. 8, 2022.

“The group believes its counterproposal offers sufficient cash flow relief to support the province's near-term fiscal challenges due to the impact of Covid-19 without imposing unnecessary losses on the province's credit providers,” the release states.

“The group is disappointed that the province continues to pursue a selective default on the notes despite maintaining a strong fiscal position, continuing to honor all of its other debt obligations and having sufficient funds to service the notes.”

The group said it does not consider the province to be in debt distress or to be facing debt distress in the foreseeable future.

The group said it believes the notes are “fully serviceable” in accordance with their existing terms and should be able to be refinanced at maturity as long as the province pursues fiscally responsible policies.

“By its own budget projections, the province's debt service ratios are robust and have not deteriorated since 2017 when it issued the notes,” the group stated in the release.

“Finding a consensual resolution to the current debt default is necessary to restore the province's credit standing and access to capital markets, as well as to foster a credible investment climate in the province,” the group said, adding that December’s talks “have made it evident to the group that the province's default is borne not of financial necessity but rather of choice.”

The group is represented by White & Case LLP.

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