Category: Argentina

Argentine pipeline companies are being negatively impacted by the natural gas crisis in their country, according to Fitch. The scarcity of natural gas has increased the near-term credit concerns of the two gas transportation companies in Argentina, TGN and TGS. The ongoing challenges faced by these companies include the low probability of domestic tariff increases and continued government influence, the agency says. These risks continue to be factored heavily into the companies’ ratings. TGN faces greater risk as there is a possibility that it will not be paid due to an existing gas transportation agreement. This led Fitch recently to change TGN’s outlook to negative from stable.

MercadoLibre has abandoned plans to sell a block of shares worth up to $292m. The Argentine online trading platform withdrew the offering through a filing with the SEC yesterday without giving much detail. Executives close to the process say the company’s investors decided the deal, which was largely planned as a liquidity event for MercadoLibre’s long-term stockholders, would not make sense at the current market. Since January, the stock is down 46%. Among the company’s main shareholders are private equity firms Hicks Muse Tate & Furst, General Atlantic and Tiger Global as well as online auction company Ebay. “The [selling shareholders] chose to wait until after the company announced their quarterly earnings, which were strong,” says a banker close to the process, referring to a March 7 announcement that included a rise in quarterly revenue of 74%, albeit to a measly $27m. “The fact they pulled this deal is largely a market driven choice based on the trading price,” says a banker away from the transaction. JPMorgan and Merrill Lynch were slated to lead the offering, which may still come back later in 2008.

The long term sovereign rating of B+ (stable) that S&P has in Argentina is unlikely to be downgraded by the farmer’s strike. “Nothing has happened so far to change our minds,” says Joydeep Mukherji, an analyst at S&P. “The events that we have seen recently are consistent with a B+ rating.” The fiscal situation in the country, however, remains a key factor for the rating, according to Sebastian Briozzo, an S&P analyst in Buenos Aires. “The downside risk to the ratings of Argentina is more dependent on whatever happens to the fiscal situation, “Briozzo says.

Argentine bonds have begun to feel the impact of the latest round of protests from farmers complaining about an increase in the country’s export tax. “This [wave of protests] increases uncertainty on what is going to happen in the very short term and this is why bond spreads are widening,” says Pablo Morra, analyst at Goldman Sachs. Argentine CDS spreads widened by around 20bp [Tuesday] morning, he adds. The current crisis should last only a few days and the government might have to give some concessions to end the strike, the analyst speculates. The administration has, however, already ratified the decision to increase the export tax. “If the strike is prolonged for a long period of time it will lead to output losses, tax revenue losses and export revenue losses so the impact would be negative,” adds Morra.

Carlos Planas, a Deutsche Bank managing director and head of the shop’s Argentina sales and trading business, has left the firm to join Bulltick Capital Markets. The longtime Deutsche executive is relocating to Miami to build out Bulltick’s burgeoning fixed income sales and trading operation. “We’re forming an investment bank in Latin America and putting together a top of the line team to build out our capital markets capabilities,” Luis Alberto Guerra, managing partner at Bulltick, tells LatinFinance. Planas’ departure does not bode well for Deutsche, which recently lost a team of senior bankers in Brazil to Itau BBA. In an internal memo obtained by LatinFinance, Seth Waugh, CEO for the Americas at Deutsche Bank says a new Brazil country head would be named as soon as possible and that the bank “remains fully committed to LatAm generally and Brazil specifically.” Waugh also wrote that Deutsche would continue to “expand” its presence in both. A Deutsche spokeswoman declined to comment.

Argentine real estate company Cresud aims to sell ADS and local shares worth up to $290m Tuesday. The issuer is conducting a rights offering whose supply is expected to spill over into the hands of new investors too, say bankers on the deal. The company finalized its submission period for ADS March 13, while holders of Buenos Aires-listed common stock have until tomorrow to put in their requests. Common shares are being offered at ARP5.37 while ADS, each of which represents 10 common shares, are $16 apiece, according to Dealogic. Cresud is using part of the funds to up its stake in IRSA, in which it owns a controlling stake. Citi, Deutsche and Raymond James are leading the deal. Separately, Citi is heard to have provided Cresud with a bilateral loan, though size and use of proceeds are unclear.

A joint venture between Argentina’s Enarsa and Petroleos de Venezuela is soliciting letters of interest to build LNG regasification plants in Argentina. The two state-run firms will accept statements of interest until Tuesday. The solicitation comes as Argentina faces gas shortages. Meanwhile, a 2002 utility rate freeze has discouraged investment in the country’s gas sector. Plans for an LNG facility would rival those of Petrobras, which has expressed interest in the past in building a terminal in Uruguay to pipe gas into Argentina.

Argentine private equity firm The Petersen Group is slowly but surely drawing participants into the $1.02bn syndicated loan it is raising to acquire 14.9% of YPF. The loan is being led by Credit Suisse, BNP, Goldman Sachs and Itau, and has garnered MLA participation from ABN AMRO and Natixis. At least two more banks, and some large institutional investors are expected to come into the group, says a banker close to the process. The 3-year average life loan was priced in December using a model that included three components: Libor, 3-year Argentine CDS and a 200bp spread. The cost of the loan was fixed at Libor plus 565bp, says the banker. In addition to the syndicated loan, the Petersen Group, also referred to by market participants as “the Lowlands Group,” received a seller’s note of equivalent size from Repsol. Petersen Group is run by Argentine banker Enrique Eskenazi and his sons. The family owns, among other assets, Banco de Santa Cruz. YPF is the Argentine subsidiary of Spain’s Repsol and the country’s biggest oil company.

YPF, the Argentine subsidiary of Spain’s Repsol, filed Monday plans to raise up to $3.75bn through the sale of secondary shares. The sale is part of a long-running plan by Repsol to reduce Argentina exposure. The sale of up to 25% of the company, which values itself at roughly $15bn, will take place on both the NYSE and the Buenos Aires Stock Exchange, with up to $3.1bn of the total to be listed as ADS on the former, according to a filing with the SEC. YPF stock is very thinly traded, with only 393m shares outstanding in total, according to Dealogic. That makes this offering more akin to an IPO than a follow-on, says a banker familiar with the deal. Another ongoing divestiture process for YPF comes in the form of a sale of up to an additional 25% of its shares to the Petersen Group, an Argentine private equity consortium. Credit Suisse, UBS, Goldman and Itau are leading, with BNP acting as financial advisor to YPF. The same group, excluding UBS, is leading a $1.02bn syndication for Petersen to acquire the first 14.9% of the YPF shares.

Argentine finance minister Martin Lousteau is locked in a tussle for real inflation data that could cost him his job. He is going head-to-head with internal commerce secretary Guillermo Moreno over the accuracy of the February index which was supposed to be published next week. Fausto Spotorno, chief economist at consulting firm OJF & Asociados in Buenos Aires predicts that whenever it is released, February CPI will draw criticism. “This doesn’t help to bring down inflation expectation,” the analyst says. “Uncertainty generates more inflation.” Goldman Sachs sees as a positive development that the government has postponed the release of the index. “It is still unclear how this story will end, whether Min Lousteau will ultimately prevail in the ongoing power struggle, and whether a new, more credible index will be released any time soon,” says the shop.