Merely hours after Mauricio Macri’s victory in Argentina’s presidential election, Pampa Energia has filed an equity follow-on offering, ready to ride the wave of buoyed investor sentiment in the country.
The power company’s secondary offering of American Depositary Receipts was interpreted as signalling a shift in market sentiment in Argentina, after 13 years of interventionist policy from the outgoing Cristina Fernández’s Front for Victory party.
“A lot of people have been waiting for positive news out of Argentina and this deal signals what could be the start of a new era for the country,” one observer said. “Corporates in Argentina are keen to pursue growth opportunities and investors will look to capitalize on the change.”
In the debt market, Banco Hipotecario went on the road last week, and is expected to tap the market this week. The Argentine bank is seeking to issue a five-year note between $200m and $500m.
Bond markets rallied slightly after the election results were announced, but one DCM source said a Macri victory was already priced into potential issuances. DCM bankers remain bullish on Argentina’s fortunes however, with one predicting the country to be the second “geographical pole” in Latin America alongside Mexico in 2016.
“It’s not going to be immediate though: definitely something we’re going to start seeing at the mid-to-end of next year,” he added. “I’m glad however, even though it is what people expected.”
Congressional hurdles
Macri’s Cambiemos coalition won the election by a narrow 51.5% to 48.5% margin, giving the party just over 30% of seats in the senate and Chamber of Deputies, short of the governing majority. Potential reforms will face heavy scrutiny from the opposition party and despite the optimism, some observers are cautious on short-term changes.
“Macri will have limited capacity to maneuver [in congress] and the opposition will be more vibrant,” one economist told LatinFinance. “He will have to consider that some do not support his changes and reforms will have to be gradual.”
Overall however, the result is a boon for investors looking at Argentina’s markets and Macri’s promise to lift capital controls and allow the peso to float freely is expected to support deal flow. The new administration will target a return to an investment-grade rating for the sovereign, Carlos Melconian, an advisor to Macri, told LatinFinance earlier this year.
“I’m disappointed he didn’t win by more,” a second DCM source said. “There is an opportunity here for Argentina to settle with its debt holders and have real issuances in the future.” LF