YPF Leads Argentina Corporate Bond Rout on New Forex Limits

Corporate bonds from Argentina posted their biggest decline in six months as a new round of capital controls and government restrictions on access to dollars threatened to provoke a wave of defaults.

Notes from state oil producer YPF SA due in March lost 7.5 cents to 88.9 cents on the dollar. Shopping mall operator IRSA Propiedades and clean-energy producer Genneia SA were also hit as investors dumped securities that mature over the next six months.

Central bank officials announced last night that companies that owe more than $1 million a month won’t be allowed to buy dollars at the official rate unless they refinance at least 60% of their debt maturing before the end of March. The restrictions -- which officials estimated would apply to $3.3 billion of debt -- are a desperate attempt to hold on to greenbacks as reserves fall dangerously low.

“The central bank is changing the rules again,” said Roger Horn, a strategist at SMBC Nikko Securities America in New York. He added that there was a good chance the restrictions would be extended beyond March, potentially broadening the list of affected companies.

“This will most certainly be extended well into next year,” Horn said.

YPF Leads Argentina Corporate Bond Rout on New Forex Limits

Central bank chief Miguel Pesce also announced new taxes on dollar purchases by individuals, but it was the change in rules for companies that spooked bond investors. The monetary authority said businesses need to push out maturities two years on most of their overseas debt coming due in the next six months. Pesce urged businesses to come up with a plan and present it to the central bank for approval.

Of course, companies would need to negotiate with their bondholders for such a restructuring, regardless of the regulations from the central bank. Some corporate finance chiefs had already anticipated a shortage of dollars and moved to delay maturities. Banco Hipotecario SA began a debt swap last month. YPF did a $1 billion exchange in late July.

Corporate debt maturities cost the central bank about $800 million in reserves per month, according to estimates from Buenos Aires-based brokerage TPCG. Argentina has about $6 billion in net reserves, according to Credit Suisse.

“The latest measures reaffirm our view that there is no Argentine corporate immune to the sovereign,” said Santiago Barros Moss, a debt analyst at TPCG.

Following is a list of major overseas bonds maturing in the next six months:

IssuerMaturityAmount Outstanding
ALBAAROct 11, 2020$30m
CRESARNov. 14, 2020$74m
IRSAARNov. 15, 2020$182m
GNNEIANov. 20, 2020$7m
GNNEIANov. 23, 2020$52m
BHIPNov. 30, 2020$281m
ALBAARFeb. 16, 2021$20m
YPFDARMarch 23, 2021$413m

Source: TPCG Valores

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