Argentina’s Chubut Reaches Agreement in Principle With Creditors

(Bloomberg) -- Argentina’s Chubut reached an agreement in principle with a majority of bondholders, making it the country’s second province to reach a debt deal after the national government restructured $65 billion.

Chubut and its main creditor group agreed to restructure over $600 million originally due in 2026, and to swap them for bonds due July 2030, according to a statement Saturday. Chubut had been trying to reorganize its debt even before the coronavirus pandemic hit South America’s second-largest economy.

The deal, which still needs to be officially launched, gives the province “significant relief” until 2023, and includes step-up coupons starting in January. In exchange, the agreement strengthens its collateral status -- the province’s bonds are secured by the proceeds of oil and gas royalties -- and proposes a cash sweetener to early participants.

The province will need 75% of holders to agree on the restructuring to drag the rest of the creditors to the deal. The new notes will accrue an annual interest rate of 7.5% until October 2021, and then rise to 7.75%.

More than half a dozen provinces, including the country’s largest, Buenos Aires, have been in talks with creditors to delay their own payments. Mendoza was the first to restructure its debt in August.

Analysts had expected those deals to be more generous than the one by the national government, which ended at about 55 cents on the dollar. Argentine’s government bonds have tumbled deep into distressed territory since that deal.

©2020 Bloomberg L.P.