LatinFinance - March/April 2015 - 61

ARGENTINA
CORPORATE
DEBT

A handful of Argentine companies have landed innovative funding despite
the country's tumultuous economy. With better days in sight, corporates are
preparing for smoother borrowing conditions. By Charles Newbery

Borrowing time

emand for corporate finance managers is on the rise in Argentina.
The ZonaJobs employment site reports the norm for Greater Buenos Aires has long been
about three job listings a month. Now it's 17.
"Companies are coming to realize that they have financial problems and need more
expertise," says Federico MacDougall, an economist at the University of Belgrano in Buenos
Aires.
This search for talent is a sign of how companies are trying to sustain profits during an
economic downturn and at the same time prepare for a rebound in financing opportunities
expected in 2016. After years of limited and costly access to local and international capital
markets, Argentina is in transition toward a potential boom in bond issues.
A few well-heeled companies aren't waiting for the sovereign to clean up its financial act,
instead, thanks to creativity and sound balance sheets, they are finding borrowing options.
Some are rolling over debts at lower rates and longer terms. Construction and engineering
company Benito Roggio e Hijos recently bought back some bonds falling due in the short
term and extended others with a $120 million, five-year bond paying 8.75%, says Marcelo
Iraola, the manager of corporate banking at Banco Galicia, a leading private Argentine bank.
Other borrowers have gotten more creative. A number have skipped the established
markets and gone straight to individual lenders. Bonds from both state-run oil company YPF
and state-owned technology company INVAP have tapped into funds that otherwise would
sit in certificates of deposit. Home appliance retailers and agribusiness companies have
borrowed through trusts that pool investors' money.
YPF is proof that, with enough commodity exports on the horizon, international
financing is still possible. Despite Argentina's pariah status, the company has raised $2.2
billion on global markets since October 2013. Its latest issue came in January, making it the
first Argentine company to sell abroad since last year's sovereign debt default. One YPF
bond, maturing in 2024, was priced to yield 8.95%, less than the comparable sovereign debt.
But financing has come with a hefty price tag and has not been available to everyone.
Others question the practicality of pursuing cumbersome and time-consuming financing.
Out of favor
A market darling in the 1990s, Argentina slipped in creditworthiness in the 2000s following
a $100 billion sovereign default and failure to fully restructure the debt. This cut the country
off from global financial markets and pushed it to a second debt default in 2014. (See "Sifting
for Dollars," page 59.)
Recession, 40% inflation, and dodgy economic policies and practices also discouraged
investment and cut profits. Detractors cite the doctoring of inflation and GDP data to
show better national numbers, as well as the state takeover of private assets and trade

restrictions, not to mention unwarranted
tax inspections of critics and fines on
companies that raised prices.
"Argentina has no credibility in the
financial markets," says Ezequiel Bidau,
a financial advisor for Miami-based
ACP Securities. "The banks fear this
government."
President Cristina Fernández de
Kirchner's administration ruffled
investors when it started restricting capital
movement in 2011 to protect dollar reserves
after a sharp decline in the peso. It barred
saving in dollars and ordered companies
to refrain from sending dividends abroad.
Then came a clampdown on blue-chip
dollar swaps, a popular and legal way to

HORACIO BUSANELLO
GRUPO LOS GROBO

"THERE ARE A LOT
OF OPPORTUNITIES
FOR GROWTH IN
ARGENTINA, BUT THEY
CAN'T COME ABOUT
BECAUSE THERE'S NO
FLUID FINANCING"
move money in and out of the country. The
scrutiny on foreign funds has frightened
many companies from taking the legal risks
to bring borrowed capital into the country,
says Andres Azicri, a managing director
of ACGM, a New York-based boutique
investment bank.
Last year, the government started to
cap prices of consumer products, causing
profits to shrink along with working capital.
The number of bounced checks rose
by two-thirds to 32.6 billion pesos ($3.8
billion) in the first eight months of 2014
from 20 billion pesos in the year-earlier
March/April 2015 - L ATINFINA NCE.COM 61

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