Argentina's third export-related CLO in as many months closed Feb. 21. Amounting to US$15 million, the 185-day transaction priced at an annualized 7.5%. The price on the coupon-free bond came at 101.28. Fitch Ratings gave the deal A3(arg)' on the short-term national scale.

On Nov. 27, HSBC Bank Argentina priced a US$6.1 senior tranche of a seven-month securitization of loans to farmers. Also rated A3(arg)' by Fitch, that deal priced at 7% (see ASR 12/9/02, p.18). Both were designed for domestic institutional investors.

HSBC, BBVA Banco Frances, and Banco Rio structured the latest deal and provided the collateral, which was comprised of dollar loans to three exporters: Benvenuto, Molinos Rio de la Plata, and Tecpetrol. Proceeds will finance a predetermined set of exports.

The risk of the deal is bound entirely to the health of the export trio. As the smallest of the three, Benvenuto cannot receive more than US$1.5 million in loans under the deal. Tecpetrol exploits and sells oil and gas. Molinos sells a variety of consumer goods and is the country's leading exporter of packaged sunflowers. Finally, Benvenuto exports foodstuffs.

Prepayment on the loans after a certain date will automatically accelerate the bonds. Part or all of the paper can be amortized as early as 151 days from issuance. The exporters deposit their payments in a New York account, having signed a promissory note under NY law. The Argentine institutional investors that bought into the paper will be paid back pesos at the exchange rate used for liquidating the exporters' disbursements. The collection account is at an HSBC branch in New York. First Trust of New York is trustee on the deal. Bruchou, Fernandez, Madero, Lombardi y Mitrani is legal counsel.

The yield is a weighted average of the rates charged the three exporters. The loan for Benvenuto priced at 8.5%, Molinos was at 7.5% and Tecpetrol, 7.25%. If one of these companies does not ship off the earmarked products within 150 days of the loan disbursement, it must pay back the full amount plus a fee of 0.5%.

The offshore protection for the transaction is probably designed to keep sovereign risk at arm's length. The impeccable performance of structured export deals out of Argentina throughout the crisis has not abolished concern that the government might eventually tamper with the foreign exchange operations of exporters.

On top of the presidential elections scheduled for April, Argentina's currency trouble refuses to die. The Supreme Court ruled in favor of re-dollarizing deposits of the Province of San Luis, which threatens to usher in a chaotic period of depositors clamoring for their lost dollars. Should they win even halfway, some analysts predict the government will have to pony up. In its search for new funds, the export sector, which has provided the largest increase in tax revenues during the economic recovery, might prove an irresistible target.

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