Argentina’s Pampa Said to Plan First Bond Deal to Fund Purchase

  • Proceeds will repay bridge loan before interest rate rises
  • Company working with six banks to arrange the debt offering

Pampa Energia SA is planning its first bond offering as soon as November to help repay a bridge loan that funded its takeover of Petroleo Brasileiro SA’s Argentine unit, according to two people with knowledge of the matter.

Argentina’s biggest electricity company may issue as much as $500 million of notes, which will be used to partially repay a $750 million 18-month loan it got last month to pay for Petrobras Argentina SA, said the people, who asked not to be named because the information isn’t public.

A Pampa Energia representative declined to comment.

The company plans to offer the notes as seven-year securities that may yield under 7.5 percent, in line with the $500 million of 7.375 percent notes issued in July by Petrobras Argentina that have the same maturity. Since being issued at 99.33 cents on the dollar, those notes have risen to 103 cents and yield about 6.7 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Lender Group

Deutsche Bank AG, Citigroup Inc., Industrial and Commercial Bank of China Ltd., Grupo Financiero Galicia SA, Credit Agricole SA, and Banco Hipotecario, the banks that provided the bridge debt, will arrange the bond sale

The maturity of Pampa Energia’s bond offering may be increased to 10 years if there’s enough investor demand, one of the people said. The company wants to issue the bonds in November before the interest on the bridge loan increases from 7 percentage points above the London interbank offered rate after the first six months to 7.25 percentage points. The rate on the loan would be increased to 9.5 percentage points above Libor during its last three months.

Bridge loans are a short-term financing, which are typically replaced by longer-term debt in the bond market. Banks that offer bridge debt start increasing the interest rate on the financing as an incentive for the borrower to repay the debt with bonds.

Pampa Energy may vary the eventual size of the bond offering, selling anywhere between $300 million and $500 million, depending on the amount needed to pay Petrobras Argentina’s shareholders in the mandatory offering the company must do after its acquisition, the people said.

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