Argentina’s Macri Resolves Another Nasty Bond-Default Battle

  • Turbine maker Impsa poised to emerge from $1.1 billion default
  • Macri backs deal that gives control of company to creditors

President Mauricio Macri has rewarded Argentina’s bond investors with some of the biggest gains in emerging markets. Now, they can also thank him for helping resolve one of the country’s most intractable corporate debt disputes.

Two years after Industrias Metalurgicas Pescarmona SAIC YF defaulted on $1.1 billion, the turbine maker is poised to restructure its debt in a deal under which creditors will wrest control of the company from the family of businessman Enrique Pescarmona. The settlement comes after Macri told the company’s state-controlled bank lenders to prioritize saving the turbine maker and the jobs it had created even if that meant Pescarmona would no longer be in charge, said Enrique Szewach, the vice president of Banco de la Nacion Argentina SA. 

In November, the bank and two other state-run lenders joined bondholders and the Inter-American Development Bank in rejecting a restructuring deal that would have allowed the family to retain control of the company known as Impsa. The IADB, the biggest creditor, even sought to seize the Cesna Citation X airplane regularly used by Pescarmona, according to court documents.

“Macri’s instruction was to facilitate the restructuring of the debt to protect the company and their jobs even though this would imply a change in the company’s ownership,” Szewach said from Buenos Aires. “We proceeded under these guidelines and the restructuring will be approved by our board this or next week."

Ismael Jadur, an Impsa spokesman, declined to comment on the restructuring plan. Pescarmona didn’t reply to an e-mail seeking comment, nor did the government’s press office.

As part of the deal, the creditors -- which include bondholders Moneda Asset Management and Greylock Capital Management -- will control 65 percent of Impsa and have the irrevocable right to sell the company. The Pescarmona family would receive $10 million in the event of such a sale, though that payout may be worth less as restructuring expenses are deductible from that amount.

Impsa’s $390 million of bonds due in 2020 have almost doubled since July to 15.5 cents on the dollar.

The Pescarmona group of companies, which includes Impsa, defaulted on $1.4 billion of debt in September 2014 after struggling to collect payments from clients in Venezuela and Brazil -- countries that were politically aligned with then-President Cristina Fernandez de Kirchner. Her attempt to bail out the company in early 2015 failed.

Macri, who took office in December, has sought to undo the policies of his predecessor, including improving relations with foreign debt investors. He ended a decade-long battle with overseas creditors earlier this year.

Argentina’s government bonds have returned 22 percent in 2016, versus an average gain of 15 percent in emerging markets, according to JPMorgan Chase & Co.

“Rescuing the company and their jobs rather than the shareholders is the policy indicated to us by the President and the one we will follow,” Banco Nacion’s Szewach said.

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