Argentine utility Albanesi engages with creditors following a default on bond obligations. Two subsidiaries of Argentina’s utility Grupo Albanesi have contacted creditors following a missed payment on dollar bonds issued merely six months prior. Generación Mediterranea SA and Central Térmica Roca SA are engaging with bondholders to address a disagreement regarding US$19 million in interest that was due on May 5, as stated by the companies in a regulatory filing on Tuesday. According to sources familiar with the situation, who requested anonymity due to the confidential nature of the discussions, debt holders have not yet established a formal creditors committee.
Investors have abandoned the bonds following the companies’ announcement that they would default on the payment due at the end of April. The US$350-million notes due 2031 – jointly issued by the two subsidiaries in October – have declined approximately 28 cents, now trading at 60 cents on the dollar, as reported by Trace data. The rout has positioned the notes as one of the poorest performers among Argentine peers this year, as indicated by data compiled by Bloomberg. Company officials are afforded a 30-day grace period to address the outstanding dues, failing which they may face the prospect of default. If negotiations do not succeed, Albanesi may find itself among a range of companies that have faced difficulties due to President Javier Milei’s austerity measures, which have involved reductions in subsidies and the removal of currency restrictions.
“We cannot say that we are surprised,” remarked Diego Méndez, a strategist for Buenos Aires-based brokerage PPI in a note on Monday. “For a few years, we have indicated that its solvency was at least questionable, given that it exhibited by far the worst credit ratios in the industry, and even in comparison to other sectors.” The subsidiaries have engaged Finanzas & Gestión SA and Rothschild & Co as their financial advisers, alongside Skadden, Arps, Slate, Meagher & Flom LLP serving as legal counsel internationally, as indicated in the regulatory filing released on Tuesday. A representative for Albanesi refrained from providing further commentary beyond the document.
The missed payment follows substantial investments by the electricity generator in two of its thermal power plants, alongside the commencement of construction on a new facility, thereby constraining its balance sheet. Albanesi, the parent company, recorded a pre-tax loss of US$190 million in 2024, in contrast to a pre-tax loss of US$35 million in the preceding year. The ratio of net debt to earnings before interest, tax, depreciation, and amortisation was recorded at over 8.5 times at the conclusion of 2024, an increase from 8.1 in 2023 and 4.57 in 2022, as per the filings. The situation was further complicated by a dispute between Milei and Argentine power companies earlier this year, following the administration’s decision to halt payments to them in an effort to address the country’s budget deficit.
Economy Minister Luis Caputo provided merely a portion of the funds owed to the generators for specific dispatches to the state electricity wholesaler Cammesa. The companies, including Pampa Energia SA and Central Puerto SA, accepted with reluctance; however, Albanesi was already entrenched in a liquidity crisis. Cash and cash equivalents decreased to approximately US$2.46 million in 2024, down from US$42 million in the previous year. Nevertheless, the choice to default on its commitments caught some analysts off guard, considering that executives had taken significant steps to bolster its balance sheet. Albanesi engaged with bankers in October to refinance certain debts and subsequently issued new senior secured notes, on which it has now defaulted in paying interest.
“Albanesi has been walking a fine line for quite some time, but the update was a bit unexpected considering that the successful debt exchange conducted last October seemed to give the company some breathing room,” said Ezequiel Fernández, head of credit and equity research at Balanz Capital. In October, Fitch analysts projected that Ebitda would increase to US$270 million in 2025, in contrast to the US$182 million reported by the company for 2024. Albanesi also sold local bonds and secured a US$59-million syndicated loan in January to eliminate bank lines and refinance existing debt.
Those factors “had made us comfortable that, though tricky, this would be a year of improvement for the company,” stated Alejandra Andrade, a Latin America Corporate Research Analyst at JPMorgan Chase & Co, who holds a neutral rating on Albanesi’s notes. Currently, strategists are closely monitoring how the company will navigate its way out of the debacle. Albanesi’s bonds have reduced some of their losses in the days after the missed interest payment, potentially indicating that the power generator could navigate its obligations to creditors with greater ease. “This seems to reflect that at least a part of the market could be considering a less adversar al, out-of-court agreement with creditors as the more likely scenario,” Balanz’s Fernández said.