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Borrower view: Argentine province opens door to debt markets for sovereign

In October the Province of Buenos Aires issued its first international bond since the sovereign’s default in December 2001. The placement’s success demonstrates how far Argentina has since come. Hernan Lorenzino, the province’s under-secretary of finance, tells Chloe Hayward about this bond issue and its impact for Argentina.

Province of Buenos Aires fact box

Governor: Felipe Solá
Finance undersecretary: Hernan Lorenzino
Capital: La Plata
Population: 13,827,203 (2001)
Debt strategy: Vanilla bond deal for $475 million with a 12-year maturity. First international deal since 2001 financial crisis. PBA restructured on $3 billion of defaulted debt last December

The Province of Buenos Aires has returned to the international capital markets. The question is: will the province’s bond deal pave the way for the sovereign’s return, or is it just out of necessity as the federal government becomes more tight-fisted in its distribution of funds? The PBA issued $475million of 12-year government bonds on October 25 at a yield of 9.75 %, which immediately tightened to 9.57% in the secondary market. The notes sold with a coupon of 9.375% and were priced at 97.417 at a spread of 492 basis points over US treasuries. It is expected that the province will return to the markets again next year.

“The Argentine provinces are becoming the sovereign’s window to the international capital markets,” says Walter Molano, head of research at BCP Securities. Hernan Lorenzino, the under-secretary of finance for the Province of Buenos Aires, agrees “This issue is important for the federal government because it illustrates the investor environment in terms of Argentine debt,” he says.

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