The Entre Rios (CCC/CC) provincial government is evaluating whether to pay its next bond coupon or to restructure its debt, Uriel Brupbacher, the province’s finance secretary, told Debtwire.

The USD 65m debt service payment related to its USD 465.7m 8.25% 2028 bond is due 8 August.

A crucial factor in determining whether Entre Rios can make the payment is the completion of the agreement the Argentine federal government is working on with the provinces, according to Brubpacher, who warned that the longer it is delayed, the more complicated the situation will get.

“The agreement between the president and the governors was delayed, and it will have a big impact on the decision. We have two projected scenarios: Canceling or restructuring the debt,” the finance secretary said.

As previously reported, President Javier Milei’s fiscal package is stalled in the Senate. It proposes the reinstatement of income taxes on salaries as low as USD 2,000 per month. If this does not pass, it would be a problem for provinces that are going through financial stress, such as Entre Rios, since the income tax receipts are distributed among provinces.

Entre Rios has yet to hire any financial or legal advisor, according to Brubpacher.

S&P revised its credit outlook to negative from stable on 9 May due to Entre Rios’s deteriorating fiscal performance, combined with a reduction in transfers and limited financing flexibility.

The federal government’s automatic transfers to Entre Rios province declined by 20.9% YoY in April, representing an ARS 32.9bn (USD 36.9m) decline, according to economic consultancy Politikon Chaco.

Entre Rios had used a USD 48.6m loan from Banco de Entre Rios to help make its USD 65m debt service payment due 8 February, as previously reported. After the February debt service payment, Entre Rios almost depleted the liquidity reserve fund it established in 2022, S&P said.

“We continue to analyze different alternatives,” the finance secretary said. “And the governor has asked us to take measures to contain public expenditures.”

Entre Rios’s 2028 bond traded at 77.5 on 21 May, according to MarketAxess.