Argentina Said to Seek $10 Billion in Loans From Wall Street

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  • Loans would be repaid by the monetary authority in a year
  • Argentine newspaper La Nacion reported talks earlier

Argentina’s President Mauricio Macri.

Photographer: Eitan Abramovich/AFP via Getty Images

Argentina’s President Mauricio Macri has kicked off talks with several Wall Street banks for $5 billion to $10 billion of loans in a bid to shore up central bank reserves, according to two people with knowledge of the matter.

Macri’s incoming Finance Secretary Luis Caputo, who traveled to New York this week, spoke with banks about backing the loans with sovereign debt owned by the central bank, said the people, who asked not to be identified because the matter is private. The loans would be repaid by the monetary authority in a year, said one of the people. A spokeswoman for incoming Finance Minister Alfonso Prat-Gay didn’t immediately reply to an e-mailed request for comment.

The search for financing comes as Argentina’s new government says it will unwind former President Cristina Fernandez de Kirchner’s capital controls, which have kept the peso artificially strong at about 9.75 per dollar, fueled parallel currency markets and stalled the economy. Unable to tap international bond markets because of a decade-long feud with creditors left over from the nation’s 2001 default that Fernandez refused to pay, the country is faced with the lowest level of international reserves in nine years.

“Given the financial emergency, we expect the government to obtain about $10 billion in financing in the first quarter to build reserves,” Sebastian Rondeau, an economist at Bank of America Corp., wrote in a report Thursday.

Argentine newspaper La Nacion reported the talks earlier Thursday.

Macri was sworn in Thursday. Caputo told a court-appointed mediator in New York that he wants to begin settlement negotiations with the holdouts, led by hedge fund Elliott Management, promptly.

The holdouts, who are trying to limit the nation’s ability to raise money offshore to pressure Argentina to comply with a court order to repay their defaulted debt, will scrutinize any transaction for violation of the judge’s orders, according to a person with direct knowledge of their position. U.S. District Judge Thomas Griesa has prohibited Argentina from paying future overseas creditors before settling with the holdouts.

Stephen Spruiell, an Elliott spokesman, declined to comment.

“Attempting to access capital markets via foreign banks, ahead of a resolution, would
only serve to complicate matters,” Josh Rosner, a bank analyst at Graham Fisher & Co., wrote in a Dec. 6 report. “It would risk embroiling the new government in the legal problems created and perpetuated by the Kirchner regime and would be a counterproductive approach for a new administration seeking a fresh path.”

In an interview on TN television network on Thursday, Prat-Gay said he and the rest of the economic team will review the nation’s accounts Friday, their first day in office.

“People shouldn’t expect a barrage of economic measures,” he said. “They will arrive gradually. We have to see what the real situation is. Today is a day to celebrate, tomorrow we’ll begin to work and see what needs to be done.”