June 10, 2015 / 4:01 PM / 4 years ago

Buenos Aires province exchanges bonds, eases refinancing pressure

BUENOS AIRES, June 10 (Reuters) - A week after its successful bond sale, Argentina’s province of Buenos Aires said on Wednesday it would swap $375.4 million worth of bonds maturing in 2015 for notes due in 2021, further allaying looming refinancing pressure.

Investors have shown strong appetite for Argentine debt in recent months, despite the country being in technical default on some bonds. The reason is double-digit yields and the expected upside from a change of government after October elections.

President Cristina Fernandez is constitutionally barred from a third consecutive term and all of the main candidates are seen as more business-friendly and likely to resolve the country’s legal battle with some creditors that pushed it to default last July.

Buenos Aires province had offered to swap up to $500 million of the 2015 bonds with a 11.75 percent coupon for 2021 bonds with a 9.95 percent coupon.

Investors holding some 75 percent of that amount accepted the offer, it informed the stock exchange on Wednesday.

“Around $375.4 million worth of the existing bonds were offered and accepted in the swap,” the province said. “We expect the swap to be settled around June 11, 2014, or as fast as possible from then on.”

Buenos Aires said it would issue $399.5 million of the new bonds, reflecting the premium bondholders are receiving for participating in the swap.

The province’s bond auction of $500 million of the 2021 notes last week was heavily oversubscribed, with bids totaling more than $2 billion.

That came as a relief given that, as of late last year, the province faced $2.76 billion of principal and interest payments in 2015, according to an investor presentation seen by Thomson Reuters’ IFR unit.

Debt servicing costs are set to decline to about $1 billion in 2016 and to a similar amount in 2017.

Critics say refinancing by Argentine provinces and the government facing imminent debt payment deadlines and elections comes at a high cost to future governments given the lofty yields.

The yields offered by the Buenos Aires province compare favorably with those on other existing Argentine bonds such as the city of Buenos Aires’ 2021 notes and state energy company YPF’s 2024 bonds. Both been trading with yields around 8 percent.

BNP Paribas and Bank of America Merrill Lynch were bookrunners on the transaction. Banco de la Provincia de Buenos Aires was co-manager. (Additional Reporting by Davide Scigliuzzo at IFR and Eliana Raszewski; Editing by Alan Crosby)

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