Ar­gentina agrees to bor­row $5b from US banks

The Pak Banker - - COMPANIES/BOSS -

Ar­gentina's cen­tral bank reached terms with seven Wall Street banks for $5 bil­lion of loans as the govern­ment looks to bol­ster re­serves ahead of talks with hold­out cred­i­tors next week.

The one-year loan, fi­nal­ized to­day, will be backed by sov­er­eign bonds, ac­cord­ing to an emailed state­ment from the cen­tral bank. Ar­gentina has been seek­ing to shore up its cen­tral bank re­serves af­ter years of cur­rency con­trols and poli­cies that dis­cour­aged in­vest­ment and de­pleted the coun­try's sup­ply of dol­lars. Un­able to tap in­ter­na­tional bond mar­kets be­cause of a decade-long feud with cred­i­tors left over from the na­tion's 2001 de­fault, the coun­try's cash hoard dropped to a nine-year low last month. Next week, of­fi­cials will be­gin set­tle­ment talks with hold­ers of some de­faulted bonds who won a US court or­der re­quir­ing they be paid in full. HSBC Hold­ings Plc, JPMor­gan Chase & Co. and Banco San­tander SA are each pro­vid­ing $1 bil­lion in loans, ac­cord­ing to three peo­ple fa­mil­iar with the mat­ter who asked not to be iden­ti­fied be­cause the in­for­ma­tion is pri­vate. Deutsche Bank AG, Banco Bil­bao Viz­caya Ar­gen­taria SA, Cit­i­group Inc. and UBS Group AG will each pro­vide $500 mil­lion, the peo­ple said. The in­ter­est rate is Li­bor plus 6.15 per­cent­age points, the peo­ple said.

Press of­fi­cials for Cit­i­group, San­tander, JPMor­gan and HSBC de­clined to com­ment on the loan. Of­fi­cials at BBVA, Deutsche Bank, UBS and Ar­gentina's Fi­nance Min­istry didn't im­me­di­ately re­ply to a re­quest for com­ment. The cen­tral bank de­clined to com­ment be­yond its state­ment.

Fi­nance Sec­re­tary Luis Ca­puto will meet debt me­di­a­tor Daniel Pol­lack Feb. 1 and Feb. 2 in New York to be­gin the process of open­ing ne­go­ti­a­tions with the hold­out cred­i­tors, ac­cord­ing to a min­istry of­fi­cial. Af­ter bol­ster­ing re­serves, Ar­gen­tine au­thor­i­ties will have more bar­gain­ing power in the talks, ac­cord­ing to Her­nan Yel­lati, the head of re­search and strat­egy at BancTrust & Co.

"This is a good way of rais­ing con­fi­dence and in­creas­ing re­serves so that the govern­ment can ne­go­ti­ate with the hold­outs with­out an ur­gency that might put Ar­gentina in a sit­u­a­tion where they need to ac­cept worse terms," Yel­lati said from Mi­ami. "It's a pos­i­tive first step."

Ar­gentina's re­serves rose by $4.8 bil­lion Fri­day to $30 bil­lion, the high­est since Oct. 2, ac­cord­ing to a cen­tral bank state­ment a few hours af­ter the deal was fi­nal­ized Fri­day.

In his first month in of­fice, Pres­i­dent Mauri­cio Macri has un­done poli­cies put in place by his pre­de­ces­sors that throt­tled for­eign in­vest­ment, mov­ing to re­move cur­rency con­trols and be­ing talks with the hold­out cred­i­tors. In an in­ter­view with Bloomberg at the World Eco­nomic Fo­rum in Davos, Switzer­land, Macri said he aims for a "re­al­is­tic, rea­son­able set­tle­ment" with the hold­outs.

"We want to fin­ish all our con­flicts of the past," he said.

The hold­outs, who are try­ing to limit the na­tion's abil­ity to raise money off­shore to pres­sure Ar­gentina to com­ply with a court or­der to re­pay their de­faulted debt, sub­poe­naed HSBC in late De­cem­ber for in­for­ma­tion on Ar­gentina's ef­forts to raise cash, ac­cord­ing to a per­son fa­mil­iar with the mat­ter. U.S. District Judge Thomas Griesa has pro­hib­ited Ar­gentina from pay­ing fu­ture over­seas cred­i­tors be­fore set­tling with the hold­outs.

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