BUENOS AIRES, March 9 (IFR) - The City of Buenos Aires plans to return to the international bond markets this year and has authorization to issue up to US$890m in dollar debt, a government official told IFR on Wednesday.
The borrower is still assessing size and timing, but it could first try a liability management transaction or combine it with a new issue to address a hump in its maturity profile next year, said Nicolas Rosenfeld, the city’s director of public credit.
By addressing about US$415m in bond payments falling due in 2017, the city will further improve risk perceptions toward what is one of the strongest quasi-sovereign names in Argentina.
The city’s US$500m 8.95% 2021s are currently trading at yields of 7.1%-6.8%, while the federal government’s Bonar 2024 notes are quoted at 7.9%-7.8%.
The Province of Buenos Aires, which is considered a weaker credit, was set to price a new amortizing bond with an average life of seven years on Wednesday at a yield of 9.375%.
The city’s government has authorization to issue US$500m in new money plus another US$390m left over from a planned liability management transaction that never took place last year.
Proceeds from any bond deal are slated for long-term investments in the city.
“We don’t raise debt to pay expenses but for projects and to increase our production capacity,” said Rosenfeld.
The city will also address around US$460m in upcoming maturities in the local market this year by refinancing dollar-linked debt with peso bonds.
Borrowers are once again selling local currency debt amid renewed investor confidence as newly installed President Mauricio Macri rolls back the leftist economic policies of his predecessor.
The city was the first to issue peso debt this year with a US$65m equivalent four-year bond - which at the time was the longest tenor seen in the local market for a number of years, said Rosenfeld.
The vast majority of the city’s US$2.3bn in debt is dollar denominated or dollar-linked, but the government hopes to cut the total percentage of foreign currency debt to around 70% from 90% currently, he said. (Reporting by Paul Kilby; editing by Shankar Ramakrishnan)