Ad Hoc Committee of Province of La Rioja Bondholders Responds to the Province's Recent Announcement Regarding Payments under its Green Bond
In fact, the problem with the Province is the disdain of its government for complying with legal and contractual obligations.
NEW YORK, Feb. 27, 2024 /PRNewswire/ -- The Ad Hoc Committee of Province of La Rioja Bondholders (the "Province" and the "Ad Hoc Group") issues the following statement in response to the announcement of the Province of its failure to make timely payment under its restructured green bonds due 2028 (the "Green Bonds"):
The explanation by the Province of its failure to pay, which it attributes to the current economic situation in Argentina, is entirely specious. In fact, the problem with the Province is the disdain of its government for complying with legal and contractual obligations. The majority of proceeds from issuance of the Green Bonds were invested by the Province in its wind farm projects under Parque Eolico Arauco S.A. ("PEA"). In December 2022, the Province concluded a sale of 100% of Vientos de Arauco Renovables S.A.U., one of the undertakings of PEA, for US$171mm to Pampa Energia S.A.
Thus, having borrowed money from bondholders to build this project, the Province then sold the project for US$171mm and now purports to be unable to pay US$16mm of capital payment to its bondholders1. The excuses provided by the Province are those of a recalcitrant and recidivist defaulter.
In reality, the Province appears to have never had any intention of making its contractual payments on the Green Bonds (which themselves derive from a previous default in 2020 and a restructuring in 2021). In September 2023, even prior to the presidential elections in Argentina, representatives of the Province already reached out to bondholders with a message that the Province sought a further restructuring of its debt. The non-payment on February 24 was pre-meditated and not a result of exigent circumstances.
While other provinces in Argentina are making considerable efforts to service their debts and repair their credit reputations, the Province of La Rioja is distinguishing itself with a series of dubious records: One of the first provinces to default in 2020. The last province to restructure its debt in 2021. The first (and only) province to default on its restructured debt.
The Ad Hoc Group calls on the Province to change its approach and honor its contractual obligations. Borrowing money from good-faith providers of capital, using that money to build a valuable wind park, selling the wind park for $171mm and then defaulting on the bondholders whose capital made this possible is disgraceful and dishonest.
The behavior of the Province is harmful to the credit reputation of Argentina and its provinces and will constrain economic opportunities for the population of the Province. The Province has expressed its intention to attract investments in lithium and mining, areas where it badly lags its neighboring provinces. It is hard to understand, however, why investors would have interest in long-term investments in a province which does not operate with counterparties in good faith nor honor its legal commitments.
The Ad Hoc Group reserves its right to take prompt legal action against the Province if payment of both interest and principal is not made without further delay.
Media Contacts:
Keely Gispan
[email protected]
203-992-1230
Kylie Souder
[email protected]
203-992-1230
1 The Province was contractually obligated to pay US$26.3mm on February 24 in respect of interest and principal. In its press release, the Province expressed an intent to pay only the interest component. To date, it has paid nothing.
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SOURCE Ad Hoc Committee of Province of La Rioja Bondholders
