Argentina's Mendoza province sweetens debt restructuring offer

Argentina's Mendoza province sweetens debt restructuring offer

Bonds Debt Argentina Latin America

Mendoza, a western province of Argentina, said on Tuesday it has extended an offer to restructure $590 million in 8.375% 2024 bonds by three weeks and included an early acceptance clause and other sweeteners to gain bondholder acceptance for a deal.

The province's offer follows the sovereign’s decision this week to improve its own debt restructuring proposal with the hope of reaching a deal and avoid a protracted battled with creditors.

The province, best known for its malbec vineyards, said creditors have until July 27 to accept its revised proposal after failing to get enough adherence to the original offer — presented on June 5 — by a deadline on Monday, according to a securities filing.

“After a month of identifying holders and with fluid dialogue explaining the current situation, we launched this new proposal according to these conversations and the province's ability to pay,” Mendoza Finance Minister Lisandro Nieri said in a statement.

The results are the extension of the invitation and a sweetener for early acceptance. Creditors who accept the swap by July 20 will get an additional $41.88 per $1,000 for the existing bonds they hold.

As well, Mendoza said it will pay higher interest rates on the new bonds and will make principal repayments in greater frequency from November 19, 2023 until maturity on November 19, 2029. The province did not provide further details on the amended proposal.

The offer, which is being managed by Credit Suisse and AdCap Securities, originally called for extending the maturity to 2029 and reducing the interest rate to 4%, with payments to start after an 18-month grace period. In the first two years of payments, the interest rate will be 2% before stepping up to 4%, according to the original proposal.

Víctor Fayad Mendoza’s deputy secretary of finance, said the province will also take steps to adjust provincial spending in line with an expected decline in revenue.

Mendoza, like the rest of the provinces, is suffering a decline in revenue this year as the country’s economy tumbles because of a lockdown for the coronavirus pandemic. The lockdown, which started on March 20 and has been extended until July 17, is pushing the economy to perhaps its worst contraction in history. A survey of economists by the central bank published on Friday shows that it could shrink by up to 12.9% this year, the worst since a 10.9% contraction in 2002, then considered the sharpest one-year drop in the country’s history.

Mendoza’s improvements to its debt restructuring also come on the heels of Argentina’s decision on Sunday to sweeten its offer for restructuring $66 billion in foreign-law bonds, including by trimming the haircut on the principal on the eligible bonds, increasing the coupons and shortened the maturities on the new bonds it is offering in exchange, which was first made on April 21. The offer also includes accrued bonds as sweeteners and a shorter grace period on payments.

(File photo: Mendoza Finance Minister Lisandro Nieri)