After the tidal wave of Argentine defaults last year, foreign investors tuned out the flailing country. This year, issuers have come back, but with the exception of a YPF placement, they have tapped only domestic investors and produced tiny deals. Of the eight transactions closed so far, not a single one has topped the equivalent of US$20 million and most have barely reached the teens.

Appetite is not the problem. At the mercy of low-yielding government paper and few other alternatives, Argentine investors seem ready to lap up structured paper. The track record for the sector is strong too. "This was one of the few products that has kept paying during the crisis," said Cristian Calderon, head of capital markets for local investment bank Compania Inversora Bursatil.

The leading bottleneck, say some, is poor asset origination. With swaths of the Argentine economy stuck in a dysfunctional mode, many asset classes - such as mortgages - are out of commission. In the consumer sector and elsewhere, assets are recovering, but not fast enough to spawn blowout deals.

Curiously enough, among exporters, structured finance bankers are facing competition from the loan market. To date, most Argentine export deals have actually been CLOs, but the costs of packaging the credits into a structure are growing in relation to the benefits. "It's getting harder to get exporters into a trust at this level of cost," said a banker experienced in the field. "And banks are offering loans at attractive levels." Still, the only way for many second- and third-tier exporters to obtain financing is through the CLO structure. The future flow alternative that is popular in the cross-border market has yet to reappear locally. The longer terms of such deals would probably be unpalatable to even the hungriest of Argentine investors.

The sequel to a CLO program that premiered in February came out last month. At US$20 million, Exportadores II stands as the heftiest domestic Argentine deal so far this year. A fattened-up version of the original, the newer transaction reunites Banco Rio de la Plata, BBVA Banco Frances and HSBC Bank Argentina as both the arrangers and lenders of the underlying loans.

The deal priced at 5.5%, a steep 200 basis points inside the inaugural issue, according to a source on the transaction. He added that, despite a malfunctioning financial system, in many sectors rates have plunged as players have few options to park their cash. The final legal maturity on the deal is 270 days, while the bid-to-offer ratio hit 2X. In a departure from Exportadores I, the latest issue offers investors the freedom to obtain the coupon payment in dollars or pesos.

The exporters receiving the loans securitized in the structure are Molinos Rio de la Plata, Pecom Agra, Petroquimica Rio Tercero and Vitopel. Apart from Molinos, none of the beneficiaries were involved in Exportadores I, a reflection of efforts to bring new companies into the structure.

Another departure from the initial transaction was the participation of the International Finance Corp., which purchased a chunk (see ASR 7/21, p. 18). "It represents an ideal way for the IFC to help channel funding to a widening circle of Argentine companies," the multilateral said in a press release. While authorized to purchase US$10 million, the IFC took a smaller share because of the oversubscription. The agency seeks to bolster the development of capital markets without crowding out the private sector, a source said.

Meanwhile, the consumer sector coughed up two more small deals. Following up on a market comeback initiated at the end of 2002, credit card issuer Tarjeta Shopping closed a Ps13.75 million (US$4.7 million) deal on August 25. Priced at 14%, the Ps11.75 million senior piece of the transaction has a final legal maturity of two years. BACS Banco de Credito y Securitizacion was the structurer and issued the bond along with Banco Hipotecario. Standard & Poor's gave the deal a raA+' on the national scale. (For further details see ASR 8/18, p. 1)

A couple of days prior to Shopping, rival deal Confibono closed. Sized at Ps12.5 million (US$4.3 million) that transaction is backed by consumer credit from retail chain Bazar Avenida and Consumo SRL. The Ps10 million (US$3.4 million) senior piece priced at 11.25% and has a legal final maturity of 1.5 years. Moody's Investors Service rated the tranche' on the national scale. Banco de Valores and Compania Inversora Bursatil arranged the deal, which replicated one that closed in late June for store Electronica Megatone. More are in the works. "We have five in the pipeline, all in the consumer sector," said Calderon of Compania Inversora.

Among those deals, Consubond XX was due to price late last week. Fitch rated the Ps11.2 million piece of that transaction A+(arg)' on the national scale. The transaction totals Ps14 million (US$4.8 million) and comes close behind the last issue off the structure in June 30.

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