Lehman Brothers is said to be working on a securitization of oil and gas royalties for the Argentine province of Salta. The deal, which is rumored to be for over $100 million, will be the province's first international transaction and its first royalties securitization.

Salta had been working on a local transaction backed by coparticipation taxes from the federal government. That deal was shelved, however, due to social unrest in the province. "Everything was ready to go," said a source familiar with the offering. "But it just wasn't a good time to go out and start talking to investors."

Sources said that gas and oil royalties could prove a more marketable asset for international investors. "I would certainly be more interested in investing in oil than in national taxes," said a local investor.

Yet these assets involve delicate political issues. "Oil and gas royalties are a sensitive topic, especially in emerging market countries," said a source from the banking sector. "But the fact that Salta has a new governor who could use his political momentum to get the deal approved by the province's legislature could make this happen."

Other Argentine provinces such as Neuquen, Tierra del Fuego and Mendoza have issued successful royalty-backed deals in the past.

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