The Argentine government is negotiating with Banco Santander SA for a $1 billion loan, a strategic move by President Javier Milei to secure funds before a significant debt payment due in January, according to sources familiar with the discussions.
Santander is expected to manage a special purchase vehicle (SPV) for the transaction, structured as a repurchase agreement (repo). The deal involves offering government or central bank bonds as collateral, and the Spanish bank is currently gauging interest from international and local money managers to distribute the risk. Representatives from Argentina’s central bank and Economy Ministry did not respond to requests for comment, and Santander declined to comment.
Repos are commonly used to raise short-term capital. In the US, the Federal Reserve uses the repo market as a tool for implementing monetary policy. Argentina’s former President Mauricio Macri previously utilized repo loans from international banks to raise billions of dollars. The proposed structure for this deal includes a floating interest rate of 550 basis points above the Fed’s Secured Overnight Financing Rate, with the loan maturing in 2027. There is also a 2% commitment fee and a six-month drawdown period, as per a term sheet reviewed by Bloomberg. These terms are still subject to change as discussions are preliminary.
January Debt Payments
Economy Minister Luis Caputo recently informed Argentine brokers that the government had reached a repo line agreement with international banks. The funds from this line are intended to cover $4.7 billion in hard-currency bond payments due in January, according to meeting attendees.
This repo line indicates the government’s commitment to servicing its bond payments. Since taking office, Milei and Caputo have been working to reassure debt holders of Argentina’s intention to meet its obligations. However, investor confidence has wavered in recent weeks as the government has depleted foreign currency reserves to stabilize the currency in parallel markets.
Despite these challenges, Argentina’s hard-currency bonds maturing in 2035 have risen by 7 cents this year, trading at 41 cents on the dollar, based on Bloomberg’s indicative pricing.
Analysis and Market Impact
Securing a $1 billion loan from Santander could significantly bolster Argentina’s financial stability, especially ahead of the critical January debt payment. For investors, this move could signal a short-term opportunity to capitalize on the expected stability and potential bond price recovery. However, the success of this strategy depends on the government’s ability to maintain investor confidence and manage its foreign currency reserves effectively.
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