Argentine Companies' Return to Global Debt Markets Is Seen

(Bloomberg) -- Argentina’s company-debt drought may soon be ending.

Telecom Argentina SA plans to sell as much as $1 billion of debt in the coming weeks, while gas pipeline operator Transportadora de Gas del Sur SA is looking to sell as much as $500 million of notes. Both companies are expected to issue before May 15, according to people with knowledge of the matter.

Banco de Inversion y Comercio Exterior SA, is also looking to sell $400 million of bonds. In the second half of the year, Transportadora de Gas del Norte SA may seek to sell bonds as long as a new project is awarded to it, according to an official at the company.

Argentine companies have been sitting out the U.S. dollar bond market since January, when a flood of sales left investors reluctant to buy more of the debt. In an effort to help renew demand, seven companies from the nation met at Bank of America Corp.’s 51st floor in New York with dozens of investors on April 13, according to people present at the meeting.

Investment Update

Representatives from energy company YPF SA, Telecom Argentina, real estate operator IRSA SA, bank Grupo Supervielle SA, power generator Central Puerto SA, fast-food franchisee Arcos Dorados Holdings Inc., and energy company Pampa Energia SA, which together have a stock market value of more than $30 billion, updated representatives from investment firms including BlackRock Inc., Fidelity and Wellington Management Co. on their current figures and the future of the second-largest economy in South America.

Apart from Telecom Argentina, most of the companies present at Bank of America last week said they have no immediate plans to issue stock or bonds, four persons present at the Argentina Day event said. They wanted to tell investors how their companies are doing and their near-term outlook for the country, the four people said. All asked not to be named as talks were not public.

Argentine Companies' Return to Global Debt Markets Is Seen

The consensus was that optimism on Argentina has waned in recent weeks mainly because of global market volatility rather than a fundamental change in the country’s economy, the people said. On the other hand, upcoming elections in Mexico and Colombia were seen as positive for Argentine issuers, as the southern cone nation’s political situation is more stable than in other countries in the region.

Macri, Vidal

Local company representatives agreed that President Mauricio Macri is expected to be re-elected in 2019. They also said that Buenos Aires Province Governor Maria Eugenia Vidal will most likely be his successor in 2023, as there are no one in the political arena from the Peronist party with the ability to challenge Macri or his expected successor.

The slowdown in Argentine corporate issuance came after a Jan. 25, $500 million sale by state-owned Agua Y Saneamientos Argentinos SA, and a $9 billion sovereign sale in the first week of the year. International investors needed time to digest more issuance after those sales.

Investors have grown a little more concerned about macroeconomic risk as well, the people said. High inflation figures are a concern to the investors, but political stability remains a larger priority.

Argentine corporates, down less than 0.2 percent this year, have outperformed emerging-market corporate bonds, which have declined 1.25 percent, according to the Bloomberg Barclays Emerging Market Corporates index.

Both investors and company representatives expect the Argentine peso to remain strong over the next few months. They cite the amount of money coming soon from Argentine issuers through bond sales, and an expected wave of investment in public-private partnerships that will start with $6 billion in highways and may rise to $30 billion over the next two years.

On the equity side, Telefonica de Argentina has mandated Bank of America and Morgan Stanley to explore an initial public offering of shares both in New York and Buenos Aires that will seek to raise funds to help its owner cut debt. Power generator Genneia will be ready to proceed with its planned IPO in June, but it’s unclear whether it will instead wait until the second half of the year. Bioceres SA, which had to postpone an IPO in February, is also looking to reboot its share sale before May 11.

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