May 14, 2020 / 2:24 PM / 17 days ago

Argentine province on brink of default as bond payment deadline passes

BUENOS AIRES (Reuters) - Argentina’s Buenos Aires province edged towards likely default on Thursday as a deadline for a bond payment hit and the local government asked creditors for counter offers to restructure $7 billion in foreign debts after they rejected its earlier proposal.

The payments on dollar and euro bonds of around $110 million were due on May 14 after a grace period was triggered at the start of the month when the initial payment date was missed. There was no sign of it being paid by early evening.

The local government declined to comment.

A provincial default would sharpen a sense of crisis as both Buenos Aires and the national government carry out separate negotiations with creditors to revamp debt that has become unsustainable amid a biting recession.

Argentina’s national government is racing to restructure around $65 billion in debts by May 22 to avoid a larger sovereign default, with analysts watching the Buenos Aires situation for signals of how the country-level talks could go.

On Thursday, the province called on its creditors to act in “good faith” and provide a “plausible” counterproposal to its original offer, adding that its economic position was “fragile.”

“Now it is up to them to reach the necessary agreements that allow us to move forward,” the province’s statement said.

The statement made no mention of the bond payment.

The province earlier this week extended a deadline for a deal until May 26 after it failed to muster enough support from creditors for its proposal, which included a three-year payment halt and large cut in interest payments.

A source with the local government told Reuters that officials would keep going with an “open process” until the new deadline and that the $110 million was included in those negotiations.

Earlier on Thursday, a major bondholders’ committee that had previously rejected the province’s offer called for “meaningful negotiations” during the deadline extension.

The group, composed of 40 institutions holding more than 42% of the province’s eligible debt, added that an ongoing default triggered by a missed payment would “further aggravate” the province’s financial situation.

The local government needs approval by holders of more than 75% of the debt to move forward with its proposal.

Reporting by Cassandra Garrison and Eliana Raszewski; Editing by Dan Grebler and Rosalba O'Brien

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