Latin American loan markets saw the dramatic return of the Argentine corporate last year – thanks in large part to Techint, the Argentine-based steel and energy conglomerate.
The company set a milestone by taking out a $1.38 billion loan on the international markets – the largest to an Argentine corporate since the sovereign defaulted in 2001. The deal also helped pave the way for other local companies anxiously awaiting a change in market sentiment since the Argentine crisis.
Citigroup, BNP Paribas, HSBC and HVB acted as bookrunners on the ground-breaking deal. They pulled together a 15-strong syndicate of banks that put together the financing for the company’s acquisition of steel company Hylsamex.
“The deal’s success was down to Techint’s history of well-managed mergers,” says Mario Espinosa, managing director, global loans for Citigroup Latin America.
The loan financing was complex as it involved exposure to Mexican, Venezuelan and Argentine steel company risk: Industrial Investments Inc., owned by Techint, is the acquisition holding company in which the Venezuelan, Argentine and Mexican steel businesses will be housed. The target, Hylsamex, has a mixed credit history, and was only recently taken off the distressed list.
The financing comprised a $500 million, three-year loan to Techint’s Industrial Investments Inc., priced at 75 basis points over Libor from months one to nine, 150bp for months 10 to 18, 200bp for months 19 to 24, 300bp for months 24 to 30 and 400bp thereafter.
Industrial Investments Inc. also offered a $500 million, five-year amortizing loan with the price linked to its debt-to-Ebitda ratio, currently at 175bp. This drops to 137.5bp for less than 0.75 debt to Ebitda, but is 175bp for 0.75 to 1.0 and 250bp for between 1.0 and 2.0.
Siderar, Techint’s Argentine steel maker, offered a $380 million, three-year facility at 200bp, the biggest non-structured Argentine loan since the default. Previously, only Siderar’s sister company, Siderca, had done a non-structured deal, worth $125 million. Most loans given to Argentine companies in the past year have been export-backed.
The Techint loan signalled a turning point in how Argentina’s corporates have improved in the eyes of international banks in the post-default era. “It showed that well-managed companies with solid cash flows are able to weather sovereign risk issues,” says Espinosa.
Techint beat off several rivals to buy the 42.5% stake in Mexican industrial conglomerate Hylsamex, in May. Then in August, Techint completed its tender for the outstanding 57.7% of the stock, held by the public, as part of its $2.25 billion acquisition.
Borrower: Techint Group
Deal type: Acquisition loan
Date: August 2005
Amount: $1.38 billion
Bookrunners: Citigroup, HSBC, Hypovereisbank, BNP Paribas