UPDATE 2-Buenos Aires province kicks back bondholder deadline again

Nicolás Misculin

(Adds details, fund manager comment, meeting with Pope)

BUENOS AIRES, Jan 31 (Reuters) - Argentina's Buenos Aires province said on Friday it would postpone until Feb. 3 a deadline for bondholders to accept its proposal to delay a $250 million repayment, underscoring the province's challenge to win over creditors.

The province has now twice kicked back the deadline to get consent from creditors to delay the payment originally due on Jan. 26 to May 1. It also offered to sweeten the deal with an earlier smaller interest payment.

The case is seen as a litmus test for talks to restructure the South American nation's much larger sovereign debts, including with the International Monetary Fund, which new Peronist President Alberto Fernandez wants to wrap up by the end of March.

If no deal is struck by Feb. 3, it would leave Buenos Aires on the edge of a technical default. Provincial governor Axel Kiciloff has previously said he does not have enough funds to cover expenses and needs time to revive growth.

"I think this demonstrates that it's going to be difficult for Argentina to put a very bad deal on bondholders," said a fund manager invested in Argentine bonds, who added many felt "in the dark" about what Argentina's long-term plans were.

"There needs to be more of a sweetener."

The province has a 10-day grace period on the capital repayment, indicating that it would enter default around Feb. 5, the same day Economy Minister Martin Guzman is set to meet the IMF chief Kristalina Georgieva in Rome.

The provincial government pointed to a "complex financial situation" and reaffirmed its willingness to pay, adding that it had already improved the offer to bondholders. It did not give any details about further amendments to the proposal.

Argentine bonds - hit hard last year amid a wider market crash - have been buffeted by signals from creditors and the government over restructuring talks. Argentina and the IMF both heralded a positive meeting in New York earlier this week.

Fernandez, who met with Pope Francis in the Vatican on Friday, said that the Argentine pontiff had promised "to do everything he can to help us" resolve the country's debt situation. (Reporting by Nicolas Misculin, Additional reporting by Marc Jones in London; Writing by Dave Sherwood Editing by Steve Orlofsky and Grant McCool)