After the negotiation at the national level that Martín Guzmán closed at the end of August with private creditors for US $ 66.8 billion of debt under international law and Mendoza exchanged its titles, another province is moving forward with its restructuring.
This is Chubut, which reached a “principle of agreement” with the majority of the bondholders who are creditors of securities for US $ 650 million that expired in 2026 and which is guaranteed by oil royalties.
“The Province of Chubut announced today (by Saturday) that it has reached an agreement in principle with a majority of holders of its debt securities guaranteed with a 7.750% coupon and maturity in 2026, which the Province believes will allow members to of the group to support the province’s proposal to modify the bonds ”, it was indicated in a press release. .
The main changes introduced to seduce investors were that the maturity of the capital of the security is postponed to 2030; The interest on the bond will accrue at an annual rate of 7.50% until October 26, 2021 and, thereafter, at an annual rate of 7.75% per year; there is an improvement in the guarantee, since additional royalties will be assigned under the modified structure; and a fixed consent payment in cash equivalent to 50 basis points of the amount of capital in circulation, to be distributed among the holders who grant their consent in advance, it was detailed.
Although the cut in the interest rate they offered is not so significant, sources familiar with the negotiation explained that it should be considered that it is a bond guaranteed by trust. “Much of the relief comes from less integration of reserves for a time and less amortization and extension of term,” they said.
Although now the formal steps remain, and it is expected that the offer will be launched in the short term, and that the province maintains that “there is no certainty that said agreement, authorizations and documents will be obtained or finalized according to what is expected, nor that the consent request (offer) will be successful ”, having reached this“ principle of agreement ”already lays the foundations for a successful restructuring.
The province governed by Mariano Arcione will require the consent of the holders of 75% or more of the total principal amount of the outstanding debt to be exchanged to carry out the restructuring.
“If carried out successfully, the terms of the modified bonds are expected to provide the province with significant relief from servicing its public debt, especially during the years 2021, 2022 and 2023,” they said in the statement.
More than 10 Argentine provinces are advancing with dollar debt restructurings under foreign legislation issued in recent years.
Mendoza was the first to close an agreement with creditors for a total of US $ 530 million. Now Chubut is added.
The one with the highest amount is the province of Buenos Aires. The Axel Kicillof government seeks to exchange securities for some US $ 7.15 billion.
The latest news came from the side of a new extension (the ninth) of the negotiation period until December 4.
“This extension materializes after it is known that the bondholders’ committee has replaced the firms that advise them on legal and financial matters,” it was said.
That is why it calls for “to resume the talks in good faith that will allow a constructive solution to be reached to the problem of unsustainable debt with private companies under foreign legislation,” the Buenos Aires statement said days ago.