By Adam Jourdan and Rodrigo Campos
BUENOS AIRES (Reuters) – Argentine sovereign and provincial bonds dipped on Wednesday as the provincial government in Buenos Aires was forced to extend a deadline for creditors to agree or reject a plan to delay a $250 million bond repayment originally due on Jan. 26.
The province said on Wednesday, minutes after the consent solicitation deadline had elapsed at 1pm (1600 GMT), that it would extend the cut-off for responses related to a 2021 bond until the same time on Jan. 31.
The province needs to receive consent from holders of over 75% of the principal amount of debt.
“To date we have received the support of a significant number of bondholders, and we continue in dialogue with institutional investors whose participation would allow us to arrive at the desired result,” Pablo Lopez, the province minister of treasury and finance, said in a statement.
The payment on the 2021 bond marks the first major test for the South American country as it grapples with far more complex talks to restructure about $100 billion in public debts that the new Peronist government says it cannot currently pay.
Ilya Gofshteyn, a senior emerging markets strategist at Standard Chartered Bank, said that if Buenos Aires could not get sufficient bondholder support, it likely reflected the “difficulties facing the sovereign restructuring discussions.”
The provincial government said the terms of the bond gave it a grace period of 10 days for capital payments and 30 days for interest payments without triggering a default.
Buenos Aires province, Argentina’s largest by far, said this month it was seeking “temporary financial relief” from holders of the 2021 bond, and requested an extension to May 1 to make the repayment due this month.
Without consent, the province – and the national government – will be in something of a bind, analysts said.
“The alternatives are to either reach 75% agreement for consent solicitation to postpone the payment to May 1 or otherwise risk a hard default,” Amherst Pierpont said in a note on Wednesday, adding the question would be whether the state would intervene at the last minute.
“It’s a game of brinkmanship on whether either side caves in to avoid a hard default next week.”
Prices for Argentina’s over-the-counter (OTC) bonds were down on average around 1.3%, while Buenos Aires bonds fell across the board, led by a 3.5 point drop in the 2021 bond.
Argentina’s economy minister said on Tuesday the government was sending a debt sustainability bill to lawmakers to help bolster the country’s ability to pay.
Argentina’s center-left President Alberto Fernandez has said the country needs to be given time by creditors, including the International Monetary Fund, to revive growth in order to be able to do so.
(Reporting by Adam Jourdan and Rodrigo Campos; Additional reporting by Cassandra Garrison and Maximilian Heath; Editing by David Gregorio and Rosalba O’Brien)
