While countless Argentine issuers sank into default under the weight of the crisis, Salta Hydrocarbon Royalty stood among the few that made good on their debt during 2002. Yet recent events suggest the structure is under serious strain. Standard & Poor's yanked the trust's 2015 11.5% notes to CCC-' after the issuer dipped into reserve funds for the second time in order to make a payment. The paper is sized at US$234 million. The structure is backed by royalty payments to the province of Salta from a group of 18 companies running oil and gas concessions. According to S&P, the issuer's ability to meet payments has been crippled by withered conditions in the industry brought on by the transfer of gas prices from dollars to pesos and other disincentives to invest. Royalties could rise if gas prices recover, but that appears improbable. "A potential utility tariff adjustment and the renegotiation of existing contracts with industrial clients also remain uncertain," S&P said in a release. The transaction has an insurance policy protecting the issuer from convertibility risk.

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