Mendoza province bondholder group rejects revised exchange offer

By Wendy Van Sickle

Columbus, Ohio, July 8 – An ad hoc group of holders of the $590 million 8 3/8% notes due 2024 issued by Argentina’s Province of Mendoza said it rejects the province’s amended exchange offer, although it is an improvement over its initial offer.

“While the amended offer represents a clear improvement to the initial proposal, it still does not reflect adequately the medium-term payment capacity of the province,” the bondholders group stated in a news release Wednesday.

“In particular, the province seeks via the amended offer to significantly extend maturities which fall due well into the future at a time when the province ought to have access to markets for its refinancing.

“Further, the province seeks to extend these maturities at rates significantly below market. In effect, the offer represents an attempt to force current bondholders to provide a subsidized refinancing to the province for maturities that the province should properly and timely refinance in markets at then-prevailing rates.”

The ad hoc group said it has put forth several restructuring proposals to “appropriately” address the province’s legitimate needs and “has offered significant permanent near-term cash flow relief as well as providing maturity extensions should the province require them at the prevailing contractual rate of interest on the existing notes.”

The bondholder group said its proposals would allow the province to continue to provide essential services and to maintain its credit standing.

The province announced on Monday it was extending and amending its offer to exchange its outstanding 8 3/8% notes for new notes to be issued by the province, as previously reported.

The invitation will now expire at 9 a.m. ET on July 27 instead of 9 a.m. ET on July 6 with the deadline to revoke tender orders moved to 9 a.m. ET on July 10.

Under the amended offer, the province is also offering to pay holders who tender their existing notes by July 20 at 9 a.m. ET a fee of $41.88 for each $1,000 of existing notes.

The province will also modify the financial terms of the new notes to include increasing step-up coupon payments accruing interest on the new notes since May 19, increasing the number of amortization payments to 13 from 11 semiannual equal installments starting Nov. 19, 2023, setting final maturity at Nov. 19, 2029 and adding a redemption provision at the option of the province.

The province is also proposing to eliminate restrictive covenants on the existing notes and adding rights of holders of new notes in connection with any voluntary offer to purchase, exchange or solicit consents to amend any existing notes that were not already exchanged or amended pursuant to the invitation.

The exchange offer was originally made on June 5.

Credit Suisse Securities (USA) LLC (212 538-2147 or 800 820-1653) and AdCap Securities Ltd. (646 280-8732) are the dealer managers. D.F. King (mendoza@dfking.com, 866 342-2676 or https://sites.dfkingltd.com/mendoza) is the information, tabulation and exchange agent.

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