Cordoning Off Political Risk

Oct 1, 2002

After jumping through legal hoops, the Argentine oil company Tecpetrol successfully restructured $230 million in bank loans. Securitized revenues made the new debt palatable to creditors and the government.

Debt restructuring is invariably a painful process. But successfully completing a restructuring in Argentina these days is a feat in itself. The economy has collapsed, a catastrophe made worse by the bewildering number of regulations that Argentina's government has introduced this year that both scrapped previous rules and often contradicted each other. Yet in August, Tecpetrol, an oil company owned by Buenos Aires-based conglomerate Grupo Techint, was able to sign Argentina's first restructuring of corporate debt, which was approved by the Argentine Central Bank. Tecpetrol renegotiated $230 million in debts - bonds, floating rate notes, syndicated and bilateral pre-export loans denominated in dollars, yen and Argentine pesos maturing 2003 and beyond - with a group of 15 local and international commercial banks. It converted these unsecured obligations into a new $230 million, five-and-a-half year floating rate note backed by oil receivables and issued...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management