La Rioja Province announced on Monday that it was defaulting on its debt after it failed to pay an estimated US$26 million due on a three-year bond. 

The province’s Treasury and Public Finance Minister Jorge Antonio Quintero wrote in a letter that “the Province faced constraints in its ability to pay principal and interest due on February 24, 2024 under its bonds due 2028.”

In the letter, Quintero wrote that the province was facing “unprecedented” economic challenges. “The contraction of Argentina’s economy, high inflation and the devaluation of the exchange rate has had a direct effect on the Province’s economy, resulting in a severe decline in federal and provincial fiscal revenues,” he wrote.

“Most recently, the Province has not received co-participation funds […] making its revenues insufficient to cover its expenditures related to essential services and programs. These factors have significantly limited the Province’s ability to honor its financial commitments, including the Bonds.”

The bond in question is the RIF25, issued in dollars under New York law. It had already been restructured, something the province will now do again, according to information provided to the Argentine market.

In 2021, La Rioja asked bondholders to extend maturities on the three-year title (2028), a move investors supported. In that restructuring, it was agreed that La Rioja would pay a first quota of 5% of capital, plus “reduced interest” of 3.25%, on February 24, 2024. 

When a debt is scheduled to mature on a weekend day, the payment is usually made the next working day. Investors were therefore expecting payment today.

According to calculations by Ramiro Tosi, finance director at Suramericana Visión, the province was unable to pay around US$26 million. “Of a face value in circulation of US$318.4 million, they had to pay the coupon (on a semester basis) on a 6.5% rate, plus 5% of capital on that face value,” he said.