Corporate bonds in Argentina: the return of issuers to the international market

Juan Manuel Vazquez


After a period during which Argentine international corporate issuances remained stagnant due to strict capital controls and macroeconomic imbalances. Argentine companies have now managed to issue $5.8bn in international bonds in 2016 – $5.4bn in RegS/144A issuances and $371m in only RegS issuances. Energy company YPF represented 36% of the total issued in 2016 – $2.1bn in three bonds – while the remaining volume was issued by 11 additional companies: IRSA Commercial Properties, Banco Hipotecario, Cablevisión, EDESA, Arcor, Petrobras Argentina, CLISA, Banco Galicia, Albanesi, Banco Macro and CGC. This was definitely an improvement given the fact that since 2012, and throughout 2015, a total of $4.7bn in corporate bonds were issued and YPF’s accounted for almost 80% of that volume. In the same period, only four companies, in addition to YPF issued, new debt in the international markets.

Regarding the characteristics of issuers, it is important to clarify first of all, that the inability to access the international debt market for several years led many companies to finance their CAPEX needs with internally generated cash flow. This translated into quite attractive average debt ratios for Argentine issuers. In fact, the average indebtedness ratio for Argentine companies is approximately half the ratio observed throughout the rest of Latin America.

In addition, there has been a marked corporate deleverage since 2002. According to information from the BIS, credit to the non-financial sector with respect to GDP in Argentina was 12.3% as of June 2016, compared to 50.5% in December 2002. On the other hand, this indicator is currently at levels of 44.8% for Brazil, 107.3% for Chile and 25.8% for Mexico. In these three countries, the indicator has grown noticeably since 2002, which is why Argentina is the only country in this sample where corporate deleverage was so marked.

This has allowed companies such as Arcor or Cablevision, with very attractive indebtedness ratios, to secure debt facilities in dollars at 6.0% and 6.5% respectively. On the other hand, there were companies whose debt ratios, at the time of the issuances were more aggressive, which led them to validate higher rates, such as the cases of Albanesi, CLISA and CGC. These companies secured financing in dollars at rates of 9.625% 9.5% and 9.5%, respectively.

Regarding the use of funds, a percentage of the capital raised was directed to cancel pre-existing debt and extend maturities and another part was destined to CAPEX.

Looking ahead, the Argentine corporate sector is in a position to continue to participate in the international debt market, particularly in those areas that, regardless of the global and local context, are attractive to international investors. In relation to this, there are corporate sectors in Argentina that should move towards a transformation after their businesses were affected by several years of macroeconomic imbalances. The normalisation of these sectors – in particular energy and utilities – presents an attractive opportunity to investors seeking exposure in these industries.

At PUENTE, we are always looking for the best alternatives for our clients so that they can successfully implement their investment strategies.

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