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Buenos Aires Teeters on Default Amid Last-Minute Deal Call

Scott Squires

(Bloomberg) -- Buenos Aires, Argentina’s largest province, looks set to enter default as a delayed debt payment falls due Thursday, with creditors making a renewed appeal for a deal to restructure the bonds.

The bondholders’ steering committee urged the province to find a “successful and consensual solution” as it seeks to restructure about $7 billion in overseas debt, according to an emailed statement on Thursday.

The talks will continue in the shadow of the national government’s negotiations to restructure $65 billion of debt. The government has set a deadline of May 22 for those talks, while the Province of Buenos Aires has said it will continue negotiations until May 26. The consequences of a default would be dire for the province, bondholders said.

“The Steering Committee urges PBA to use the additional time provided by the extension to engage in meaningful negotiations to reach a successful and consensual solution” the creditor group said in a statement. The group, which is advised by Mens Sana Advisers’ Marcelo Delmar and Broadspan Capital, reiterated that the committee hoped the two sides could come to a solution.

The province asked the bondholder group to present a plausible counteroffer, and said it has an “ongoing dialogue” with the creditors that haven’t accepted the proposal, according to an emailed statement.

The province’s $750 million in bonds due next year were little changed today, slipping 0.2 cent early in the day to 31.9 cents on the dollar. The bonds have returned a negative 35% this year. The Emerging Markets Traders Association recommended that bonds from the Province of Buenos Aires trade flat starting May 15, unless otherwise agreed.

A 10-day grace period on $150 million in delayed payments, mostly principal, expires today with little prospect of payment.

Buenos Aires officials said earlier this week the province had decided not to make the payment, while extending the deadline for talks until May 26.

The province said it’s “completely committed” to an orderly, good-faith process, according to an emailed statement Monday. The proposal, which has been rejected by creditors, asks investors for a three-year grace period on debt payments and a steep cut to interest rates, similar to what the national government is offering its creditors.

“In absence of a consensual restructuring, an ongoing default would further aggravate PBA’s financial situation,” the creditor group said in the statement.

(Updates to add quote from provincial statement in fifth paragraph, comments from Emerging Markets Traders Association in the sixth paragraph)

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