Mensajepor Gaston89 » Vie May 03, 2013 12:46 pm
BN) Barclays Sounding Alarm on GDP Warrant Payouts: Argentina C redit
By Camila Russo and Katia Porzecanski
May 3 (Bloomberg) -- Owners of securities tied to Argentina’s economy risk missing out on payments until at least
2015 as speculation deepens the government will be tempted to underreport growth to free up money for state-owned YPF SA, according to Barclays Plc.
Seized by President Cristina Fernandez de Kirchner a year ago, Argentina’s largest oil producer is eligible to tap a $2 billion trust she created to invest in the oil and gas industry.
The money will come from $3.5 billion of reserves set aside in the 2013 budget for warrant payouts, which are no longer needed after last year’s gross domestic product fell short of the 3.26 percent growth hurdle. The warrants have fallen 17 percent to
5.51 cents since the last payout in December.
“It’s bad news for GDP warrant holders because suddenly they’re competing for funds with YPF,” Sebastian Vargas, an analyst at Barclays, said by telephone from New York. “There’s obviously a conflict of interest there. If you’re talking about growing 3 or 3.5 percent, why would you report 3.5 when you can save $3 billion to finance YPF? It’s very simple.”
Locked in a legal dispute with holdout creditors from its record $95 billion default in 2001, Argentina hasn’t been able to sell bonds abroad for more than a decade. Having tapped $30 billion of reserves to pay foreign debt since 2010, Fernandez now needs to help finance YPF’s $37 billion spending plan over five years. Argentine bonds yield 13.89 percent, almost triple the emerging-market average, according to JPMorgan Chase & Co.
Last Payment
Press officials at the Economy Ministry didn’t immediately respond to an e-mail or telephone messages seeking comment on speculation it could underreport growth to avoid warrant payments.
Fernandez paid $3.52 billion on the GDP warrants on Dec.
14, based on 2011’s economic expansion of 8.9 percent.
Last year, 2 percent growth was insufficient to trigger a payment next December. The government has paid $10.26 billion on the warrants since they were issued as part of debt restructurings in 2005 and 2010, according to Quantum Finanzas.
In the past eight years, growth has averaged 6.7 percent, according to the government’s statistics institute.
While the government might have overestimated expansion to gain political support in the past, a growing need for dollars means it’s unlikely to do so again if this year’s expansion is close to the payment threshold, said Eduardo Levy Yeyati, director of Buenos Aires-based consultancy Elypsis.
‘Forget’ Warrants
“Why would they inflate growth if they’ll get a huge dollar bill to pay at a time when dollars are scarce?” Yeyati, who is also a fellow at the Washington-based Brookings Institution public policy organization, said in a telephone interview. “There won’t be a coupon payment until at least 2015 so I would just forget about the warrants for a while.”
The accuracy of Argentina’s official statistics has been questioned by independent economists, opposition politicians and the International Monetary Fund, which has threatened to sanction the country if it doesn’t improve its inflation and GDP reporting.
After drought-hit harvests and a slowdown in Brazil, Argentina’s biggest trade partner, weighed on expansion in 2012, activity is picking up fast enough to ensure the threshold for a payment is surpassed this year, according to Hernan Lacunza, a former general manager of the central bank who now runs research firm Empiria Consultores.
Fernandez is unlikely to meddle with the statistics just to avoid a disbursement, said Lacunza.
‘Electoral Costs’
“The government won’t underestimate growth to save money because recognizing economic stagnation has electoral costs,”
Lacunza said in a telephone interview from Buenos Aires. “It’s very likely that this year the reported growth will be above the threshold.”
Economic activity grew 3.2 percent in January and 2.3 percent in February from a year earlier, according to the national statistics institute. At that pace, the economy is on track to expand 3.6 percent this year, Lacunza said.
Warrants fell 0.2 percent to 5.51 cents at 8:50 a.m. in Buenos Aires.
The extra yield investors demand to own Argentine bonds instead of Treasuries narrowed 14 basis points to 1,191 basis points at 11:56 a.m. in Buenos Aires, according to JPMorgan Chase & Co.’s EMBI Global index.
The peso fell 0.1 percent to 5.1970 per dollar.
‘Negative Signal’
Central bank reserves have fallen 17 percent in the past twelve months, the fastest pace in more than a decade, and at
$39.5 billion are at their lowest since May 2007. Last year, the government posted its biggest budget deficit since 2001.
“It’s worrying how fast reserves are falling,” said Lacunza, who left the central bank in 2010, when Fernandez fired the institution’s then-President Martin Redrado for refusing to use reserves to pay debt. “With this hydrocarbons fund, the government is sending a very negative signal. It’s saying it’ll use reserves for anything, not just to pay debt. Today it’s YPF, tomorrow it can be anything else.”
Shrinking reserves and a widening budget deficit is hampering Fernandez’s ability to meet YPF’s investment needs.
When she announced the expropriation of 51 percent of the company from Repsol SA, she said the Madrid-based company didn’t invest enough in expanding output, causing an increase in energy imports.
In the fourth quarter, YPF’s oil output fell 4.8 percent to
481,000 barrels a day from a year earlier, while gas production slid 2.7 percent, according to the Buenos Aires-based company’s
2012 earnings report.
Biggest Borrower
Since its nationalization a year ago, YPF has been the biggest borrower on Argentina’s local debt market, selling 14.64 billion pesos ($2.8 billion) of bonds, or about half of all corporate debt sales. Much of that was purchased by the national social security agency, known as Anses, and by insurers, which are required to place part of their assets in government- approved investments, including the state oil company.
On April 26, YPF sold 2.25 billion pesos of bonds and $150 million of dollar-linked notes.
The company has failed to secure partners to develop its Vaca Muerta shale oil deposit, the third biggest in the world.
Restrictions on buying dollars, remitting dividends, potential litigation by Repsol and unpredictable regulations are deterring potential foreign investors, Elypsis’s Yeyati said.
“The consequence is insufficient dollar financing, which will have to come at the expense of reserves,” he said.
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