Over the last few months, Argentine aluminum company Aluar has been talking to bankers about a potential export deal in the cross-border market, according to sources. Talks have apparently not crystallized into a mandate however, as key international players - even those once active in the country - are staying aloof from the country and its issuers.

One source said a deal could come this year, given that a US$150 million export backed-bond issued by the company via Citibank in 1997 paid down on June 14 in full. Others doubt a cross-border jaunt will come in the medium term. "The problem is credit committees will show you the door at just the mention of Argentina," said one banker, adding that paying down the deal will win Aluar "a pat on the back" but not much more. Company officials could not be reached for comment.

Only well-known oil producer YPF has succeeded in placing an Argentine ABS abroad since the default and it had two strong advantages that Aluar would not be able to replicate. One was that the two deals closed in 2003 enjoyed a contingency supply agreement that bound YPF's investment-grade Spanish parent, Repsol, to the structure. That gave enough comfort for monoline insurers Ambac and XLCA to wrap one deal each.

What is more, YPF has broad name recognition. Aluar's recently matured ABS was held entirely by local investors and the company does not have the kind of market entree a well-regarded global parent can confer. Fixed-income U.S. investors may need more time before embracing an Argentine issuer new to them, particularly when future-flow deals continue to trickle out of Brazil and other corners of the emerging universe.

If the company does award a cross-border mandate, the arranger is sure to gush about the performance of the company's domestic ABS to U.S. investors. As the business environment collapsed around it, the structure never tripped an amortization trigger, according to Juan Pablo de Mollein, director at Standard & Poors. Perhaps the only wrinkle in this story was a two-notch downgrade by the agency to raA+' on the national scale from raAA' previously. "We had to reassess the company" under the grim circumstances brought on by the Argentine meltdown, de Mollein said.

The securitization was backed by future receivables stemming from aluminum exports to six Japanese trading companies. A particular strength of the deal was the stipulation that the customers remain investment grade on S&P's global scale. A letter of credit was needed if a customer failed to meet that condition.

A factor that helped mitigate ongoing concern risk was the company's limited exposure to the erratic domestic market, with over 80% of sales made abroad. In addition, Aluar controls a hydroelectric generator that provides roughly half its power needs, which curbs its dependence on a power market that has proved unreliable in the post-crisis regulatory environment.

The company exported 225,000 metric tons of pure aluminum and aluminum-based products in 2003.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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