Category: Argentina

Merrill Lynch Wednesday told clients it is raising Venezuela to overweight and cutting Argentina to market weight from overweight in the model portfolio. “Following a crucial sell-off in Venezuelan bonds, we are beginning to see value again,” says the shop. “We believe the elements that have been negatively impacting Venezuelan bonds might have run their course and notice increasing investor appetite at current values.” Merrill says Venezuela is likely to remain in the IMF, it does not see the drawdown in foreign reserves as unexpected, and nor does it see nationalization of Orinoco Belt projects as likely to negatively impact bonds. In addition, Merrill sees WTI averaging $64 and $66 a barrel this and next year, respectively, up from $60 and $62. “At those prices, Venezuela would continue to accumulate an integral amount of foreign assets,” says the shop. It tips the Venezuela 2025s and 2014s and predicts that one-year protection will cheapen. Meanwhile, Merrill takes cash out of Argentina, where it says the curve adjustment is not over and sees supply concerns weighing.

Argentina may launch another local-currency debt instrument to help weaken the strengthening peso and curb inflation, say local media. Excess liquidity is putting pressure on the exchange rate which has risen to ARP3.10 to the US dollar. The proposed peso-denominated bond is heard to carry a maturity of five years.

Moody’s has assigned a provisional (P)Ba1 global local currency rating to Banco Macro $100m senior unsecured Argentine peso-linked notes due 2012. The notes, to be issued under Macro’s existing $400m MTN program are expected to price this week. Moody’s also assigned a provisional (P)Aa1.ar local currency debt rating on the Argentine national scale to the notes due to an option to make payment on the notes in pesos, “in the event of legal or regulatory restrictions or any other reason beyond Banco Macro’s control”. The outlook on the ratings is stable.

Argentina managed to lower the yield on the second tranche of its Bonar X, dollar-denominated issue, selling $750m to yield 8.44%, just below the 8.46% it achieved in April. The government said demand for the 7% paper, due 2017, reached $1.86bn. The total Bonar X program for 2007 is $2.5bn.

Venezuelan Finance Minister Rodrigo Cabezas has said that the new regional development bank, the Banco del Sur, will be up and running by the end of June. Venezuela, Argentina and Bolivia have already said they will dedicate funds to the Bank, while Brazil, Ecuador and Paraguay may also join. The bank, designed by and for South Americans and to be based in the region, could have an initial capital of $7bn, with Venezuela having committed seed money of $1.4bn already.

Argentina will issue up to $750m in another 7% Bonar due 2017 today. The outstanding $750m tranche of Bonar, which was issued in April to yield 8.46%, was trading at just above 8.40% late Wednesday, suggesting pricing on the bullet bonds could come in the 8.40%-8.50% range. That would lead to a dollar price of around 91 or just under. The total Bonar X program for 2007 is $2.5bn.

Argentina’s Transportadora de Gas del Sur priced Wednesday one of the country’s largest corporate bond offerings in recent memory, a $500m issue of 2017 non-call 5 bonds at 7.875%. The price was tightened from a 8% area. The book was heard at over $3.3bn, with 56% US, 27% European, 8% Asian and nearly 5% Argentine participation. The bulk of the buyers were large institutions and hedge funds, according to a banker close to the deal. The issuance was effectively a liability management exercise, in which TGS took out most of its 2010s and 2013s issued in 2005 which carry 8.0% and 8.5% coupons. Those notes include restrictive covenants, including a cash sweep, which increases the annual cost of the debt to over 10%. The remaining 11% of the 2005 issues is expected to be taken out in June with cash. Merrill Lynch and JPMorgan had joint books. It is rated B1/B+ (Moody’s/S&P) and the funds raised are being used to buy back debt. In a statement Wednesday, TGS said that it has had a take-up of 89.4% for its offer to buy back $424m of its 2010 and 2013s, originally issued in connection with the company’s debt restructuring in 2004. TGS also plans to cancel a debt of $206m with the IDB.

Argentine shopping mall developer Alto Palermo, a subsidiary of real estate investment firm Cresud, raised $170m in two tranches of bonds rated B+/B+ by Fitch/S&P. The $120m in 10-year bullets priced at 7.875%, the tight end of 8% guidance. The $50m in 5-year peso-linked bonds priced at par to yield 11.000% versus 11.375% talk. Citi had sole books with Standard Bank as joint-lead.

Argentina is lining up the second tranche of its new Bonar X bond and will likely issue a further $750 million, local media reported. The sovereign pushed out its curve last month when it sold $750 million of the new 10-year dollar-denominated paper in the first tranche of a program totaling $2.5 billion. The Republic then had to pay a yield of 8.46%, towards the top end of the range predicted by analysts. The 7% bonds mature April 2017 and pay interest twice a year: in April and October.

Argentina’s Transportadora de Gas del Sur is out with guidance on a $500m issue of 10-year non-call 5 bonds in the 8% area. The deal is expected to price Wednesday morning via JPMorgan and Merrill Lynch. Separately, Alto Palermo, the Argentine shopping mall developer is expected to bring a two-tranche offering Tuesday, via Citi and Standard Bank. A $120m dollar portion was expected in the 8.000% area while a $50m peso tranche was talked at 11.375% area.