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Argentina, Wall Street banks in talks on financing line
December 11, 2015 / 6:21 PM / 2 years ago

Argentina, Wall Street banks in talks on financing line

BUENOS AIRES (Reuters) - Argentina’s new government is negotiating with a group of Wall Street banks for a credit line worth up to $7 billion to bolster its low foreign reserves and help it eventually lift capital controls, a banking source said on Friday.

Argentina's President-elect Mauricio Macri acknowledges the audience as he attends the inauguration of incoming Buenos Aires' City Mayor Horacio Rodriguez Larreta (not seen) in Buenos Aires December 9, 2015. REUTERS/Enrique Marcarian -

President Mauricio Macri, who took office on Thursday, wants to move quickly to remove currency controls that restrict access to U.S. dollars but is stymied by the central bank’s precariously low hard currency reserves.

The commercial banking source said Argentina was in talks with HSBC (HSBA.L), JPMorgan Chase & Co. (JPM.N), Goldman Sachs (GS.N), Deutsche Bank (DBKGn.DE) and Citigroup Inc (C.N).

But he said there remained obstacles to an agreement and that no immediate deal was likely.

“The banks are working on a deal. It would be difficult for anything to come about immediately. There are some key details needed to close this out that are missing,” said the source, without giving more details.

A finance ministry spokeswoman confirmed Finance Secretary Luis Caputo had met with banks in New York earlier this week and that the government was happy with the talks so far. Finance Minister Alfonso Prat-Gay declined to give details.

“We’re negotiating different financing options so that the dollars that should never have left the country come back as quickly as possible,” Prat-Gay told reporters after unveiling his team.

The previous government eased the reserves shortage in part by negotiating an $11 billion currency swap with China. Prat-Gay said expected to start talks with China, “which will include a possible re-opening of that swap line.”

CREDIT RISK

A second source in the central bank confirmed the talks were taking place but could not confirm the amount being discussed.

Argentina’s daily La Nacion reported that beyond the possible $7 billion being sought via the group of five banks, a further $1 billion could be secured through a financing agreement with Spanish banks Banco Santander (SAN.MC) and BBVA Bancomer (BBVA.MC).

“They’re working to lower Argentina’s credit risk given the fact that it is in default and keeping in mind the new government is working to resolve that situation,” the commercial bank source said.

Citi and Goldman Sachs declined to comment.

Argentina will ease currency controls under Macri, but not until the true amount of central bank reserves is known and its board of directors has been replaced, a senior incoming bank official told Reuters earlier on Friday.

Argentina’s central bank counts its total reserves at $25 billion, but some private economists estimate net reserves are a fraction of that.

“We will (ease controls) when we are sure it’s the right moment. We will do it as soon as possible and as calmly as possible,” Prat-Gay told reporters.

The U.S. dollar crunch stems from a festering legal battle with U.S. investment firms over unpaid debt that tipped Argentina back into default in July last year and prolonged the country’s banishment from international debt markets.

Finance Secretary Caputo also met this week with the mediator handling the case filed by “holdout” creditors who rejected the terms of Argentina’s 2005 ands 2010 debt restructurings, and have sued for full repayment. Argentina has been ordered by a U.S. court to negotiate a settlement.

“We would like to conclude the talks as soon as possible, but as you know, we will negotiate as hard as possible,” Prat-Gay said.

Additional reporting by Sarah Marsh and Hugh Bronstein in Buenos Aires and Jessica DiNapoli and Daniel Bases in New York; Writing by Richard Lough and Hugh Bronstein; editing by Clive McKeef

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