Latin Finance - September/October 2010 - 44

argentine borrowing

Reapertura?
by Ben Miller

rgentine entities are back on the credit map with a whimper, not a bang. The sovereign limped closer to access by closing a $12.1 billion exchange with holdout investors in June, but provinces are already issuing without its support. “We were ready to issue even last year,” Víctor Cisterna, economy minister of Argentina’s Chubut province says of the $150 million bond the government sold in July, backed by oil royalties. “I don’t think the federal government exchange helped us, nor did it hurt us.” Getting a majority of holdouts to agree to Argentina’s stingy swap terms was meant to end a decade of isolation from international borrowing and boost access for corporates and sub-sovereigns. It could one day revive the government’s access to international bond markets, setting valuable benchmarks for corporates and sub-sovereigns. But the government wants better pricing and is still menaced by the threat of remaining holdouts, some of which are highly litigious and understood to have majority positions in some of the defaulted bonds. Investors are liquid, and hungry for diversification and yield. Bankers want a new crop of clients beyond extremely competitive markets like Brazil and Mexico. But it remains to be seen how much supply actually emerges. Hydrocarbon-rich Chubut had begun marketing its securitization in June 2010, before the Argentine government concluded its holdout deal. Real estate company Inversiones y Representaciones (Irsa) had also been marketing a bond earlier in the year. Both were delayed due to a shutdown in markets caused by sovereign debt turmoil in Europe. The issuers and their bankers insist that they were among a select Argentine group whose history,

Fresh borrowing by Argentine corporates and sub-sovereigns dovetails with hopes of the sovereign regaining access. A corporate debt boom is unlikely.
issues in 2008 and just $595 million in volume last year. There has been $1.68 billion done through August 10, however, according to Dealogic. The total includes Chubut and Irsa, in addition to a $500 million 2021 sale from Pan American Energy – an oil producer aided by 60% ownership from BP and sizeable foreign assets – a $75 million 2017 bond from City of Buenos Aires, and a $400 million bond from Cordoba province. Excluding Pan American and a $450 million bond last year from Arcos Dorados, the Argentina-based McDonald’s operator Argentine issuers are back in the game, but not all will qualify with most of its assets outside Argentina, management and financial profile allow Irsa was the first corporate since 2007. them to borrow abroad, independent of However, though the sovereign holdout problems at the sovereign level. agreement boosts sentiment for some investors, it does little to fix local firms’ Don’t Expect a Flood It has been years since Argentine issuance balance sheets. Credits with strong links to accounted for a noticeable chunk of the international markets are to mostly annual LatAm fixed-income haul, though be found among exporters, such as oil the 2001 sovereign default has not meant producers like YPF Repsol, Petrobras complete exile for Argentine cross-border Energia, Pan American Energy, steel borrowers. There was $1.65 billion producer Tenaris, and agricultural issued in 2006 and $2.03 billion in 2007, exporters. Arcos Dorados has a significant according to Dealogic. There were no

44 LatinFinance

September/October 2010

Latin Finance - September/October 2010

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