Argentina's Salta province is working with Lehman Brothers, Banco Santander and Banco Macro on a $250 million deal backed by future flows of the royalties it receives from the exports of natural gas, sources close to the deal said.

The transaction will have a 15-year maturity and will be aimed at U.S. future flow investors. Officials from the province and its advisors are expecting to meet with investors in October with a launch following soon after.

The deal is set to be rated by the three major agencies and the northwestern province hopes that it will be the first from an Argentine province to be rated at investment grade.

Previous transactions backed by natural gas revenues came from corporates such as Transportadora de Gas del Sur and Transportadora de Gas del Norte, and were rated at the triple-B level (ASRI 7/3/2000 p.1).

Up until now, most deals from the provinces have been backed by their share of tax collected by the central government, so-called co-participation revenues. However, these deals have fallen out of favor because of the poor financial position of many states, plus tentative central government moves towards changing or abolishing the system (ASRI 11/15/2000 p.7).

Salta currently receives around $4.5 million a month in royalty revenues from oil and gas exports and that is expected to increase significantly over the next few years. The reserves are expected to last for at least another 25 years.

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