The government of the Buenos Aires Province has confirmed that it will not be able to comply with the payment of 277 million dollars and has asked creditors to delay payment until May 1st.

The administration of Axel Kicillof, the son-in-law of Cristina Fernández de Kirchner and a former minister during her last term,

reported that it will seek to negotiate with the bond holders to postpone for just over 90 days the payment of some $250 million and $27 million in interest. The payment would have to be made on January 26 with a grace period of ten working days.

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To get the postponement of the payment, Kicillof needs the approval of the holders of at least 75% of the capital before January 22, within eight days. As LPO explained, since the minimum bond subscription amount was $100,000 and the total issued was $750 million, the low number of bondholders was one of the reasons the market was enthusiastic about the restructuring.

" A process of dialogue and consultation with the creditors has been initiated", the Buenos Aires Ministry of Finance informed. "Both the province and its investors agreed on the complex situation of the provincial debt and the importance of seeking preventive solutions to minimize losses," added the Minister Pablo López. "The market's rejection of the proposed deferral would result in greater damage to the Buenos Aires economy and losses for investors in general, which with this step can be avoided," López said in a statement.

The confirmation that the province will not be able to pay the BP21 was taken for granted on Monday, when the bonds collapsed due to the national government's refusal to grant a "bailout" to Kicillof. His chief of staff, Carlos Bianco, spoke openly about the possibility of going into default.

Now the negotiations are formally opened ( up to this point there were only unofficial phone call), and they will be against the clock. The creditors have already appointed two law firms to start the dialogue with the state government. The firms are Arnold & Porter as international advisers - a law firm headquartered in Washington DC - and Bruchou, Fernández Madero and Lombardi for local representation. In December, that committee hired Mens Sana Asesores, led by Argentine Marcelo Delmar, and BroadSpan Capital as financial advisers.

Kicillof also pursued a deal with th Federal Government for an additional US$253 million renegotiation, which are held by the Anses' Sustainability Guarantee Fund (FGS). After January, the province will have to face maturities for another 1,980 million dollars for the year (with a peak of 908 million dollars in June).

There is speculation in the market that this bailout refusal by the Federal Government is just a strategy to get the creditors to accept the renegotiation. Analysts agree that for the Casa Rosada it would be too risky to let the province fall into default.

Another speculation in the market is that the threat of default in the province could be a concerted move by Argentina's President Alberto Fernandez and Kicillof to send a message to Wall Street regarding the negotiation of the nation's foreign debt, which the president wants to close before March 31. If so, the threat would be that the government is willing to go into default if the creditors refuse to restructure the country's debt.