Arcor was analyzing alternatives to deal with the USD 128m maturity of its 6% global bonds due in July 2023 amid the current FX market restrictions applied by Argentina’s Central Bank (BCRA), according to a source close to and a source familiar with the matter.
The Argentine food products company completed an exchange of 74.4%, or USD 372m, of the 2023 notes in November 2022. The deal was done in compliance with BCRA’s "60/40" rule, which orders companies to refinance 60% of their USD-denominated principal debt maturities in order to access the official FX market to repay the remaining 40%, as reported.
The BCRA “has been dragging its feet” to approve corporate refinancing plans even under the 60/40 rule lately, amid a continuous drain of its FX reserves and an expected plunge in export revenues for Argentina this year, the source close said. In this scenario, Arcor is analyzing different options that will allow it to fully repay the remaining USD 128m of the 2023s, “with or without BCRA authorization,” the source close said.
As such, Arcor may resort to a deal similar to the one implemented by real estate company IRSA earlier this year, which allowed it to redeem USD 121m of its outstanding 8.75% senior unsecured notes due in March 2023, the source familiar said. IRSA issued two hard-dollar bonds in the domestic market for USD 90m. Given this issuance and the liquidation of those funds, BCRA granted IRSA access to the MULC to refinance the total outstanding amount of the 2023 notes, as reported.
A USD-denominated bond from Arcor would see strong demand from local investors, the source familiar said. There is trapped liquidity in Argentina amid the current capital controls and a hard-currency bond from a solid corporate would attract interest, the source said.
In the event BCRA does not authorize an IRSA-like deal for Arcor, the food products firm may be able to obtain financing from international banks, the source close said. The company has undrawn committed credit lines and cash flow from foreign operations which make it easier for it to meet its external debt obligations, the source said.
Arcor had cash and equivalents of USD 128m as of 31 December 2022, of which over 65% was denominated in foreign currency, according to Arcor’s FY22 earnings release. In 2022, it generated 32% of its USD 3.5bn revenues outside Argentina, and this percentage will grow in 2023 when revenues from the new Angola business are incorporated, the source familiar said.
An Arcor spokesperson did not reply to a request for comment.
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