Year: 2021

Winner: Province of Buenos Aires $7.1 billion Restructuring

Buenos Aires, Argentina’s largest province, plans on adding more than $4 billion to its infrastructure and social investment in the coming years.

The fresh cash is the result of a long negotiation with a vast array of creditors to restructure and exchange the province’s debt. The province announced at the end of August 2021 that it had successfully restructured $7.1 billion in bonds, which would save it $4.6 billion in payments between now and 2027.

The size and complexity of the deal, which included euros and U.S. dollars and investors from around the globe, wins Buenos Aires the Subnational Deal of the Year award.

The restructuring included three dollar-denominated and three euro-denominated bonds that swapped out 97.7% of the bonds coming due in the next few years. The deal reduced the average coupon rate to 5.7% from 7.5% and extended payment schedules to 10.5 years. The bulk of the debt would have come due in less than four years.

“The most important thing was to recuperate our ability to pay, while at the same time moving forward with the policies the province needs to improve investments,” Pablo López, the economy and finance minister for the Buenos Aires provincial government, tells LatinFinance.

“The province had taken on a great amount of debt in foreign currency with enormous payments due between 2021 and 2023. We now have a debt that matches the province’s capacities and meets the long-term objectives to restore value for stakeholders by making the debt burden sustainable,” he adds.

Cleary Gottlieb, a New York-based international law firm that assisted with the deal, stated that the restructuring restored “debt sustainability levels” for the province. As a result of the restructuring, the amount of resources destined for debt service fell from 19% of the provincial budget in 2019 to around 6% percent today, freeing up money to meet demands.

The idea of restructuring the debt began in 2019, shortly after Axel Kicillof took over as provincial governor. The pandemic pushed back plans, but also made the need to restructure more urgent.

López says the restructuring, together with improved economic conditions in the country, are contributing to a new climate of growth.

The country’s economy expanded 10.3% in the first 11 months of 2021 compared to the same period a year earlier, according to the Indec, the statistics agency. The growth wiped out the losses from the pandemic.

Growth will moderate substantially in 2022, but should get a boost from the late January 2022 agreement between federal government and International Monetary Fund (IMF) to restructure its debt.

The deal involves restructuring $44.5 billion from a $57 billion loan from the IMF in 2018. It remains the largest loan in IMF history. The deal came right before Argentina was scheduled to pay $700 million in debt service. President Alberto Fernández had called the debt unpayable.

“The country is seeing a broad recovery, which has had a strong impact on the province,” says López. “There are synergies, and when the country grows, Buenos Aires grows.”

The province represents approximately 40% of Argentina’s gross domestic product.- LF