Province of Córdoba bondholders reject municipality's restructuring plan

Province of Córdoba bondholders reject municipality's restructuring plan

Bonds Debt Corporate & Sovereign Strategy Fixed Income Funds Argentina Latin America Coronavirus

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Investors holding debt issued by the Argentine province of Córdoba said Saturday that they rejected the government's proposal for restructuring roughly $1.7 billion in international bonds, saying the sub-sovereign is destroying value unnecessarily.

"The Group sees no justification for the destruction of bondholder value implicit in the Province's initial proposal, and believes a more measured approach will be sufficient to address the current pressures on the Province's public finances," the Province of Córdoba Ad Hoc Bondholder Group said in a statement released late Saturday night.

In late August, the province's finance minister, Osvaldo Giordano, said in a securities filing that the municipality wants to reduce the interest rates and extend the maturities on three dollar-denominated bonds.

The talks are with holders of $725 million in 7.125% 2021 bonds, $510 million of 7.45% 2024 bonds and $450 million of 7.125% 2027 bonds.

The group, represented by White & Case LLP and BroadSpan Capital LLC, said it has presented a counter-proposal that would defer near-term bond maturities and provide cash-flow relief in the coming years. They say they discussed their proposal with the province's leaders on Friday September 11, noting they recognize the challenges the Province is facing due to the COVID-19 pandemic. 

Bondholders said their proposal would affect only the 7.125% 2020 bond, with an aggregate principal amount of $709.4 million. They specifically said in their new restructuring terms that the other notes "will not be affected by the Transaction."

Holders of the 2021 bonds who participated in this new deal structure would receive, at settlement, for each US$1,000 principal amount of 2021 bonds tendered in the exchange, US$1,000 principal amount of New 2024 bonds, the statement said.

Córdoba had ARS196 billion ($2.65 billion) in debt the end of June this year with 90% in US dollars, including what is owed to multilateral lenders like the International Finance Corporation (IFC), according to data from the province's Finance Ministry.

Córdoba is one of several provinces seeking to ease the repayment terms on their international bonds following the federal  government's deal on August 4 to restructure $66 billion in external debt. That agreement has reduced concerns that a sovereign default could mar any deals made by the sub-sovereigns, given that it should help pave the way for the country and then the provinces to once again access international financing.

The full statement and the indicative restructuring terms:

Press Release 09122020 - Statement of Province of Cordoba Ad Hoc Bondholder Group on Proposed Restructuring... by Daniel Bases on Scribd