Last month, Aeropuertos Argentina raised $300 million in a cross-border bond that was well received by investors, with orders reportedly hitting $1.8 billion. Since the Republic of Argentina completed a debt exchange in September 2010 more than $2 billion of corporate bond issuance and $2 billion of provincial and municipal debt has been sold in the international markets. With a sovereign bond set to follow this year, creating a new benchmark for the country, the prospects for Argentine issuance are strong especially if low real interest rates in the developed markets continue to attract yield-hungry investors to emerging markets.
the current Argentine inflation rate
The Aeropuertos Argentina deal was increased in size from the $250 million that had been marketed on a three-continent roadshow. The transaction was led by Credit Suisse and Morgan Stanley, with Banco Macro running the domestic-market portion. The coupon is 10.75%, with 70% going to accounts in the Americas, 20% to Europe and 10% to Asia. The deal is collateralized by 47% of international and regional passenger-use fees and 85% of revenues from duty-free sales. In addition, to ease investors concerns, 125% of the next principal and interest payments are to be kept offshore in US dollars.
Moodys has predicted higher issuance volumes of Argentine securities despite the possibility that persistent inflation (the rate is at present 25%) will weaken the credit performance of Argentine borrowers and result in higher delinquencies in 2011.
In the first 11 months of 2010 Argentine securitization totalled the equivalent of $4.27 billion, up 86.5% on the same period in 2009. In peso terms the volume increase was 95.7% although the number of deals was static. Moodys expects the growth in securitization to continue thanks to strong performance from the financial sector with GDP growth and declining unemployment continuing to contribute to loan portfolio performance, in particular the securitized portfolios.
Moodys also expects more new infrastructure deals in 2011, largely driven by Anses, the governments social security agency, which has emerged as the main institutional investor in the domestic capital markets following the nationalization of private pension funds. In the first 11 months of 2010 eight large infrastructure transactions were undertaken, usually sponsored by the national or provincial governments. Total infrastructure-related securitization was $2.3 billion compared with $840 million in the same period in 2009.