Despite declining stocks and unresolved bondholder litigation in Argentina, Zang Bergel & Vines (ZBV) Abogados, a Buenos Aires-based law firm, has kept busy advising clients on note issuances. Agricultural company Cresud completed its issuance of Notes Series 21 and 22 for $43,889,620 on August 12, with counsel from ZBV. On July 23, the firm successfully advised BACS (Banco de Crédito y Securitización) on the issuance of Class VI notes for about $16 million.
“We provide legal advice to BACS on all financial matters,” said Carolina Arroyo, a partner at ZBV Abogados. The firm has provided counsel to BACS since the client first registered with the Securities and Exchange Commission of Argentina in January 2014. BACS’s Global Note Program, which issues about $16 million in notes every quarter, started in 2014.
According to ZBV, the bank issued the notes at 100% of the face value. The bonds will be repaid in 21 months and will have a yearly interest rate of 27.5% during the first nine months. During the remaining 12 months, the rate will be 450 bps per year.
Right now the bank is offering the notes only to the domestic market. Arroyo said this is because “BACS is only operating in Argentina” at the moment.
This transaction comes at a time of some financial trouble in Argentina, namely a recent stock market decline and Argentina’s partial default on its debt. Because the issuance is targeted only at institutional investors, ZBV does not believe the default will have an effect on the transaction, according to Arroyo. Nor, Arroyo said, has the decline in stocks impeded the deal. Solange Spinelli, in-house counsel for BACS, said that when working with ZBV, “with respect to the transaction documents, the delivery was always on time.”
Argentina defaulted on its debt in 2001. Although 93% of holders accepted the terms of the debt restructuring that Argentina offered, 7% did not, and some hedge funds still want to be paid back in full. NML Capital Limited, led by Paul Singer is a prominent example. Although the US Supreme Court ruled in favor of Singer in 2014, the conflict persists. According to an August 12 article in the Wall Street Journal, on Wednesday August 12, US District Court Judge Thomas Griesa ordered sanctions against Argentina and ruled that “any assets the hedge funds are able to track down in the U.S.—as long as they aren’t military or diplomatic—will automatically be considered commercial property that can be subject to seizure.”
The Merval Index declined 6.2%, the worst drop since January, according to a July 24 Bloomberg article. Still, an August 10 Reuters article said, “Argentina's benchmark Merval index was up 6 percent late in the afternoon.”