Argentina's Sideco/Correo: Finance Difficulties

Sideco Americana S.A.’s creditors have demanded immediate payment on $125 million of 9.125% defaulted bonds due 2002, in a bleak chapter of the Argentine company’s insolvent subsidiary Correo Argentino SA’s long-running dispute with the government. Tuesday, an investor holding 25% of the issue demanded immediate payment on the debt from Argentina’s Sideco, which has interests ranging from toll roads to waste management, said Philip Sbaratta of Seward and Kissel LLP, counsel to the bond trustee the Bank of New York. Sideco had defaulted Dec. 3 after Correo in September filed for bankruptcy, a move which turned the postal unit’s roughly $220 million in missed payments to the government into debt officially under reorganization. How did this happen? In 1997, the government awarded a 30-year concession to run the post office to a consortium comprised of entities including Sideco, whose 69% stake in Correo gives it the largest in the group. In return the consortium agreed to make $51.6 million semiannual fixed payments and provide certain postal services to Argentina at capped prices. But two years later, Correo missed a $15 million payment to the government, arguing that its creditor owed money for rendered services and that labor contracts were crippling its ability to compete in the deregulated postal market. The two sides negotiated about the matter but failed to reach an agreement. Sideco may be ahead of the curve when it comes to missed payments by Argentine companies. Analysts expect to see many defaults on international debt, as companies grapple with severe cash withdrawal limits and spiraling costs amid a currency devaluation. The government, which already requires companies to clear funds through the central bank before repatriating capital, is now thinking about prohibiting the transfer of foreign currency abroad altogether.