Latin Finance - September/October 2010 - 46

argentine borrowing

smaller amounts of domestic issuance. One bright spot, however, may be issuers with permanent or recurring investment programs, such as energy exporters. Though it was not a necessary condition, Irsa’s Blasi says the federal debt Fat Price exchange may have helped the yield on Even if entry requirements are met, the new bonds in terms of lowering the pricing should remain elevated for some overall risk perception in Argentina. Some time. Irsa’s $150 million 11.500% of 2020 international investors are prohibited from priced to yield 11.875%, after receiving investing in a country whose government is about $300 million in orders from a mix in default, he adds, so the pool of potential of Argentine local and international buyers might now be larger. buyers. Citi was global coordinator on Argentina’s 2017 dollar bonds issued the transaction, which is rated B/B minus in the exchange traded just under 10% internationally and AA minus locally. in early August. Investors expect the Blasi says Irsa could issue again under the sovereign could issue a new same program as soon as next 10-year, as it plans to, if yields Argentine Cross Border Issue Since 2006 year. continue to fall to the point Provinces lead the comeback “Irsa is somewhat unique, where it could get 10% at that it is a good story with a strong maturity, though the sovereign 2,500 business model,” says a DCM says it wants lower. Sub-Sovereign Corporate banker on that transaction. Corboba Province sold $400 “There are other good stories million in 2017 bonds in its 2,000 in Argentina,” he says, pointing public market dollar debut. A specifically to the energy sector, 12.375% yield drew in more than where markets could see 3-5 $1 billion in orders. It followed 1,500 issues in the short-term. Chubut and the City of Buenos Oil producer YPF Repsol Aires, which raised $475 million 1,000 is one of the names said to in 2015 bonds at a 12.5% yield. be eyeing issuance from a $1 Cordoba, along with Chubut, billion program, though a Buenos Aires Province, and 500 company official says there Santa Fe, which also have are no plans for a bond in the issuing plans this year, are seen short-term. as entities whose economies 0 “Argentine institutions are self-sufficient and diverse 2006 2007 2008 2009 2010* have been living with very enough to draw investor interest. *through August 9 little borrowing, and a lot of As these entities depend less on Source: Dealogic, LatinFinance them are operating with an the federal government, they optimal level of leverage,” says are seen as more free from its Diego Ferro, senior portfolio manager influence and meddling. gas company Transportadora de Gas del at Greylock Capital, which manages “There are many provinces that could Norte and dairy Mastellone Hermanos more than $400 million in LatAm debt. finance themselves [in international have concluded workouts in the past “So, they will issue if they have the markets],” Chubut’s Cisterna says. “Those year, of $345 million and $218 million, opportunity, but that will really depend are provinces with public finances and low respectively. on appetite for Argentina. Especially if debt, and which offer a secure instrument.” All of the companies rated by Moody’s the sovereign is in the single digit-level, Cisterna says Chubut – whose debt in Argentina are sub-investment grade, the market will be available for other is less than 5% of its GDP – has been in while Fitch rates only Tenaris (A-) in Argentine institutions.” contact with other provinces that are the high grade category. One Argentine Ferro adds that with spreads corporate tracked by Moody’s defaulted in asking about how they could develop compressing for issuers in countries similar securitizations. The Chubut bond is 2009-2010. This compares to six in Brazil throughout the region, stories from primarily backed by hydrocarbon royalties and four in Mexico. Argentina where, for example, a company to be paid by Pan American Energy, which Argentine corporates continue to face with only two times Ebitda is issuing at a has been awarded a production concession refinancing risk, Moody’s says, leaving 10% yield, become very compelling. for certain areas in the province. LF most issuers to continue to get by with well connected to the international environment,” Blasi says. Issuing enough to create liquidity is also essential, he says, with only a limited number able to borrow in large amounts.

Regulatory Constraint

Moody’s expects foreign investors to be skeptical about Argentina’s general investment environment for some time, as ongoing political and economic unpredictability continue to complicate corporate expansion. The utility and infrastructure sectors have been most hurt by government meddling, and are among those restructuring. As of early August, toll-road operator Autopistas del Sol had been tendering a $306 million debt exchange to holders since January, and appeared close to closing. Utility Metrogas filed in June for bankruptcy protection. Fellow

46 LatinFinance

September/October 2010

Latin Finance - September/October 2010

Table of Contents for the Digital Edition of Latin Finance - September/October 2010