The Debt Negotiations Are Heating Up

The debt saga started with the Province of Buenos Aires (PBA), which faced the maturity of the BP21 (NY law) for USD 250 million at the end of Jan-20. The province tried to defer the payment from January to May. Despite sweetening the original offer and extending the deadline to accept the deferral several times, PBA was unable to round up the baseline of 75% of creditors’ approval, and finally paid in full, avoiding default. Attention then shifted to the National Government. After issuing the new LEBADs in order to rollover debt in local currency and try to normalize the market in pesos, the Government offered two voluntary exchanges of the dual bond AF20, a Dollar-link bond issued in mid-2018 which matured in February for a ARS 105 billion amount. Both exchanges implied a haircut, the first one was more aggresive and the second one was slightly improved. Only 10% of bondholders accepted the first offer, while the second offer had no adhesion. This way, the government decided to reprofile the AF20 maturity to September. The payment of this bond could have triggered an increase in the spread with the official FX, as a significant amount was held by external private creditors.