Argentine Trusts Paving Way for Corporate Bond Sales, AdCap Says

  • Trust issuance grew 52% in October from year earlier
  • Trusts help companies `build a reputation,' AdCap says

Argentine companies looking to take advantage of a surge in optimism toward the country are increasingly using investment trusts to raise funds and gain investors’ confidence before an overseas bond sale, according to AdCap Securities, a Miami-based broker and investment bank.

South America’s second-largest economy has been in the spotlight for international investors over the past weeks as Mauricio Macri campaigned for president on a pro-business platform and won. Hedge-fund managers from George Soros to Richard Perry and companies including Brazilian foodmaker BRF SA and U.S. oilseed processor Bunge Ltd. have increased investments in the country on a wager that Macri will implement economic reforms such as letting the currency trade freely and settling a decade-old dispute with holdout creditors that imperiled the country’s access to overseas markets.

For Argentina’s small- and medium-sized companies looking to get a head start in tapping capital markets, trusts are poised to grow as the instrument of choice, Daniel Canel, the chief executive officer at AdCap Securities, said in an interview in Buenos Aires. The monthly average amount issued in trusts in the country grew 52 percent in October from the previous year according to a report by Argentina’s securities regulator, the CNV.

“For many years, Argentina companies haven’t issued debt, so there are companies that need to build a reputation before they issue abroad,” said Agustin Honig, the head of sales and trading at AdCap, which underwrites the trust securities. “Until international flows come to Argentina, there’s much need for local financial engineering that can guarantee the first steps of project financing. Trusts allow companies to start raising capital and become known in the market.”

Investment trusts will continue to grow as companies, particularly those in the infrastructure and agriculture sectors, raise money for new projects, Canel added. Since they’re tied to specific assets, investors have more confidence in the likelihood of getting paid back and interest rates are as much as 3 percentage points less than companies would get from bonds, according to Gonzalo Vallejos, the head of capital markets at AdCap.

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