Argentina province of Entre Rios bondholders file claim over interest default

By Wendy Van Sickle

Columbus, Ohio, Jan. 4 – An ad hoc group of holders of Argentina’s province of Entre Rios’ bonds filed a claim on Monday in the U.S. District Court for the Southern District of New York seeking a judgment against the province over its default on a semiannual interest payment on the notes that was due on Aug. 8, according to a news release Monday.

The group’s members hold 54% of the $500 million outstanding 8¾% notes due 2025.

“The province defaulted on its obligations despite maintaining a strong fiscal position,” the statement charges. “Indeed, by its own budget projections, the province’s debt service ratios are robust and have not deteriorated since 2017 when it issued the notes.

“Importantly, the province's ratio of debt service to revenues has declined and is far below the 15% limit applicable to all Argentine provinces established in the federal law on fiscal responsibility.”

As reported on Dec. 31, the group rejected the terms of the province’s latest proposal to restructure the bonds and delivered a counterproposal.

The bondholder group said it concluded a month-long series of restricted discussions with the province in an effort to negotiate a resolution to a default under the notes.

In the latest round of talks, which ended Dec. 28, 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 said it presented a counterproposal that 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 new notes would bear annual interest of 5% initially, stepping up to 8¾% on Aug. 8, 2022.

The group said on Dec. 31 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.

The group is represented by White & Case LLP.

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