Mendoza extends restructuring offer yet again

Mendoza extends restructuring offer yet again

Bonds Debt Corporate & Sovereign Strategy Argentina Latin America Coronavirus

Mendoza, a western province of Argentina, said on Thursday that it has extended an offer to restructure $590 million in 8.375% 2024 bonds by an additional three weeks, as it tries to build on the nearly 60% acceptance rate by investors so far.

The province, best known for its Malbec wine, said creditors have until August 28 to accept the invitation, longer than a previous deadline of August 7, according to a press release.

Mendoza said the decision comes after Argentina reached a deal with most of its creditors to restructure $66 billion in foreign-law bonds, a swap that the sovereign wants to wrap up by August 24.

"In light of this significant development, the province is extending the expiration to encourage all holders of existing notes to participate in the invitation," the provincial government said.

Mendoza's offer was first announced on June 5 to extend the maturity to 2029 and cut 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 was to be 2% before stepping up to 4%, according to the original proposal. Their offer is being managed by Credit Suisse and AdCap Securities. 

With little acceptance at first, the province amended the proposal on July 6 by offering to pay higher interest rates on the new bonds, make more frequent repayments in principal, and pay an additional $41.88 per $1,000 in the existing bonds to holders who accept before the deadline. That early-bird acceptance deadline has been extended to August 14.

As of Wednesday, the province had received tenders for $317 million in total principal, or about 59.9% of the outstanding principal, it said.

Mendoza, like the rest of the provinces, is suffering a decline in revenue this year as the Argentine economy tumbles because of a lockdown for the COVID-19 pandemic. The lockdown, which started on March 20 and has been extended until August 16, has led economists to slash their forecasts for the economy to shrink by more than 12% this year from earlier estimates of a 1% contraction.

Even so, a major hurdle for Mendoza and a handful of other provinces seeking to restructure debts was surmounted when Argentina managed to nail down an agreement for its restructuring offer this past Tuesday.

"The provinces were waiting for Argentina to throw the first stone," Sebastián Maril, a director of Research for Traders, a financial consultancy in Buenos Aires, told LatinFinance.

He said that most of the provinces launched their restructuring offers after the sovereign announced its in April, and have been extending them since at the same pace. The most advanced are Mendoza and Buenos Aires province, which is seeking to restructure $7.15 billion in debts, while others including Chubut, Córdoba, Río Negro and Salta will follow suit, Maril said.

The only major difference among the sub-sovereigns is that Buenos Aires, the country’s biggest province and most indebted, has not improved its offer since it was launched on April 24, while the others have, Maril said. He added that he expects Buenos Aires, which has extended its offer until August 14, will announce a new proposal in the next few days.