Argentina's postal service gets reprieve from judge
Argentina's postal service, one of the emblematic big privatizations of the 1990s, convinced an appeals court to give it more time to reach agreement with its creditors to restructure $300 million in debts.
Meanwhile, the Argentine government – which is the firm's largest single creditor – made it plain that it sees a new tender for the concession as the definitive solution.
The appeals panel in Buenos Aires granted a motion brought by lawyers for privatized Correo Argentina after Judge Eduardo Favier Dubois denied the firm's request to extend past Thursday the deadline for an accord.
The reprieve came just as Favier Dubois was considering a resort to the process known in the jargon of bankruptcy law as a "cram down," which involves implementing a settlement despite objections from one or more creditors.
Correo Argentina spokesman Federico Beche told EFE that "the only creditor opposed to the accord is the Argentine government," which is owed 500 million pesos ($174 million) in concession fees dating from 1999.
Other major creditors include Citibank, Banco Rio, the Inter-American Development Bank, the World Bank's International Finance Corporation and Banco Galicia, which also owns 11.77 percent of Correo Argentino.
With a stake of 73.5 percent, the majority owner of the postal service is the Argentine industrial conglomerate SOCMA.
The so-called "cram down," which is anticipated in the country's new bankruptcy law, "permits any of the creditors to sign up within five days to propose taking control of the firm in exchange for assuming its debts and reaching an accord on payment with the rest of the creditors," a source at Correo Argentina told EFE.
Judge Favier Dubois had given the firm until Thursday to gain creditors' approval for a plan to restructure debts of 900 million pesos ($313.5 million).
President Nestor Kirchner's Cabinet chief, Alberto Fernandez, said Thursday that the Argentine government is ready to immediately take control of the postal service in order to "guarantee the delivery of a public service that cannot be in the hands of a bankrupt firm."
While the interior minister, Anibal Fernandez, made it clear that "the government's objective is not to take permanent control of the firm," but rather to re-open the bidding for the postal concession.
He said the Kirchner administration's ongoing review of the 62 contracts granting concessions to provide public services was geared toward ensuring that the firms live up to their agreements, "and in cases where they don't, that the (concession) revert to the state incidentally, as a prelude to re-opening the tender."
The interior minister said the government would seek to "optimize" the functioning of the postal service prior to selling it to another private firm.
He also pledged that officials would select "the best alternative (to) benefit the state and not harm the firm's 12,100 employees," who hold 14 percent of the shares in Correo Argentino.
The postal service is offering to pay its creditors between 30 percent and 40 percent of what they're owed, in the form of 25-year bonds with an annual interest rate of 1 percent.
Becher, Correo Argentina's spokesman, maintained that "while it's true the postal service owes the state the concession fees, it's also true that since taking over the concession, in 1997, the post office has transformed itself from an obsolete service into a modern, efficient firm."
The firm also went on the offensive against the government, placing an add in the Thursday editions of the country's major newspapers in which it claims that the state failed to meet its contractural obligations to Correo Argentina, and was in arrears to the firm for mail services.
Many Argentines complain that the massive privatizations under the 1989-1999 administration of President Carlos Menem involved unduly favorable terms for the acquiring firms.
Kirchner, a bitter foe of Menem, appears to share this belief and is prepared to seek to revoke some of the contracts in favor of new bidding processes. EFE
