After La Rioja defaulted, a group of international creditors again demanded payment of $26.3 million in principal and interest and granted a ultimatum to the province governed by Ricardo Quintela to fulfill its commitments in 14 days or, if not, the bondholders will go to court and take other measures.
These are green bonds that the province has issued under foreign law for a total of $318 million with a rate up to 8.50% and maturity in 2028 to finance the construction of the Arauco Wind Farm. The province had agreed to pay interest on the Feb. 24 due date, but made a partial payment of $10 million.
In this context, the ad hoc committee of creditors of La Rioja, through the law firm Quinn Emanuel Urquhart & Sullivan, today sent a letter of reservation of rights to the Province in which it “urges it to pay the balance of the obligated amounts to be paid on the 24th February within a period of 14 days,” it said in a statement published on Wednesday.
“The Committee has reserved all its rights, including that of immediately declaring the entire principal of the Green Bonds payable or taking other action, in the event that the Province continue with your current position”bondholders warned, adding that it was the only one to default on its international debt after the 2020-2021 restructuring.
“While all other provinces with internationally issued debt have made principal amortization payments and serviced their debt on time, La Rioja stands out for failing to meet its contractual obligations,” the statement said.
The Minister of Labour, Employment and Industry of La Rioja, Federico Bazán, had assured at the end of February that “the conditions and income of the province have changed significantly, therefore it is facing unprecedented economic challenges, such as the contraction of the country’s economy, “High inflation, devaluation and its effect on dollar income for the province.”
In the midst of tensions with the country over cuts to the provinces, the government administered by a former ally of Sergio Massa accuses Javier Milei’s management of the lack of funds. The thesis is that the Executive has blocked the resources that the Province had approved in the 2023 and 2024 budgets and a credit with the Nation that ““He hasn’t been paid for five months already.”
But the ad hoc group considered the decision “atrocious” because the bond proceeds were used to build a series of wind farms, one of which the province sold in December 2022 for $171 million to Pampa Energía, the energy company Marcelo Mindlin. “The Province had the means to pay its debt, but decided not to,” the bondholders warned.
After the default, “the Province has publicly declared that it will pay the interest (but not the principal) due on February 24 as a “demonstration of good faith”. Although good faith implies full compliance with contractual obligations (especially if the holders’ money has generated a valuable return for the Province), so far bondholders have received only a portion of the interest payments due.” creditors.
Furthermore, the statement concluded, “The province has not undertaken any type of dialogue with the owners starting from their non-compliance and did not respond to the ad hoc group’s proposal to remedy the non-compliance.
Source: Clarin
