Argentina firms to face refinancing problems-Fitch

NEW YORK, Nov 6 (Reuters) - Argentina's companies will face increased refinancing problems next year as a government plan to nationalize the pension system is drying up liquidity of the domestic bond market, the main source of funding for the country's private sector, Fitch Ratings warned on Thursday.

Argentina's domestic bond market play a crucial role in financing the country's corporate sector because international capital markets are closed to Argentine borrowers, while banks try to preserve capital amid a global credit crisis.

"The recent proposal by President Cristina Fernandez to nationalize the private pension funds threatens to eliminate the local bond market as a source of liquidity," said Fitch's managing director Joe Bormann.

"The pension funds participation in the local debt market is essential. Without them, there are not enough investors to absorb the huge financing needs," he added.

Argentina's private pension funds collect nearly $3 billion per year in contributions. Although a large chunk of that money ends up financing government bonds, another sizable portion is invested in local corporate debt.

The plan to take over the pension system, along with the negative effects of the global credit crisis, have already dramatically reduced activity in the local debt market -- to $306 million in the first nine months of 2008 from $1.853 billion in the same period of 2007, Fitch said.

The ratings agency said, however, that Argentine companies currently have a much more conservative debt structure than in previous crisis, which in general should allow them to manage upcoming debt maturities. (Reporting by Walter Brandimarte; Editing by Diane Craft)