Ad Hoc Group of Bondholders of the Province of Buenos Aires Rejects False and Misleading Statements by Province's Finance Minister

NEW YORK, March 25, 2021 /PRNewswire/ -- In an interview published by Ámbito Financiero on March 23,  the Minister of Finance of the Province of Buenos Aires (the "Province"), Pablo Lopez, made a series of false and misleading statements regarding the Province's ongoing default and a recent proposal made by one of the Province's bondholders, GoldenTree Asset Management. These statements continue the pattern of lack of good faith from the Province that has led international bondholders to bring legal action to protect their rights. 

Among the false and misleading statements from Minister Lopez are the following:

Falsehood #1:

Regarding the proposal made by the Province to GoldenTree disclosed on March 21, Minister Lopez told Ámbito:

"It is a great effort for the Province, and has terms that are considerably better than those of April. However, [the bondholders] continue in a stance that we consider to be quite intransigent where they require us, for example, to commit ourselves to pay $2 billion in the next four years, which is the equivalent of all the public works of the Province over two years."

The Truth:

First, note that Minister Lopez for some reason chooses to compare debt payments over 4 years with capital expenditure over 2 years.  This makes no sense and is already misleading.  But beyond misleading, it is completely false.  According to the Province's actual budget figures, public works investments in 2021-2022 amount to $2.411 billion, or 6.1% of revenues.  The recently published GoldenTree proposal requires cumulative debt service of only $465 million in 2021-2022.  The truth here is that creditors have proposed debt service that is more than 80% lower than public works expenditures.

From 2015-2019, when Maria Eugenia Vidal was governor, the Province's annual debt service averaged $1.19 billion annually.  Not only was this debt serviced without default, but the Province simultaneously engaged in significant public works programs.  Understood in this context, the GoldenTree proposal reduces the debt service burden over the next two years by more than 80% compared to amounts routinely serviced by the Province.

Falsehood #2:

Minister Lopez mischaracterized the terms of both the Province's proposal and the GoldenTree proposal:

"We proposed coupons that allowed us to reach an average coupon of approximately 4%, and yet they demand an average coupon of 7.5%, which are clearly very similar to current levels and do not generate the relief that the Province needs."

The Truth:

Minister Lopez should be entitled to his own opinions, but not his own facts and certainly not his own math.  The Province's proposal has an average coupon of 3.7%, not 4%.  And the GoldenTree proposal has an average coupon of 5.6%, not 7.5%.  This discrepancy raises issues of competency and good faith.  Either Minister Lopez knew the actual facts but chose to provide a distorted picture, or he and his staff had not done the basic homework of analyzing the GoldenTree proposal.  Either explanation demonstrates why bondholders have been left with no option other than to seek justice in court.

Falsehood #3

Minister Lopez made false and misleading statements about the relative size of the Province's debt burden:

"Each province has its own reality, its own fiscal and social situation. In this sense, I can speak of the Province of Buenos Aires, which has a very large level of debt, with maturities that in recent years have come to represent close to 20% of total revenues."

The Truth:

At only 9% of provincial GDP, the Province has one of the lowest debt burdens in Argentina.  The only provinces with lower debt burdens, Santa Fe and the City of Buenos Aires, have fully serviced their debts with no defaults.  Meanwhile, provinces with higher debt burdens, including Jujuy (40%), Chubut (19%), Neuquen (18%), Entre Rios (13%), Salta (13%), Mendoza (13%), Rio Negro (11%) and Cordoba (11%) have all negotiated with their creditors in good faith and successfully concluded debt restructurings.

Minister Lopez's math regarding historical debt service of the Province is also wrong.  Between 2015-2019, total annual debt service for the Province averaged 12% of revenues and never exceeded 14.8%.  Further, much of the Province's debt is intra-public sector (particularly, ANSES) and is routinely rolled over.  When considering the relevant metric of external indebtedness, the picture becomes even more clear.  From 2015-2019 under Governor Vidal, the Province managed average external debt service of 4.8% of revenues.  By contrast, under the GoldenTree proposal external debt service from 2021-2024 would average 2.4% of revenues, or 50% below comparable levels that were comfortably serviced in prior years.

The Ad Hoc Group of Buenos Aires Bondholders is comprised of beneficial owners under eleven series of outstanding notes with an aggregate principal amount of more than $7.1 billion issued by the Province of Buenos Aires.  The Ad Hoc Group reiterates that good-faith negotiations are the only path by which a consensual resolution of the Province's default can be reached.  The misleading statements by Provincial authorities are unproductive and unfortunate and only serve to perpetuate what is ultimately a political decision to remain in default.

The Ad Hoc Group is being advised by White & Case LLP. For media inquiries, please contact [email protected].

SOURCE White & Case LLP