Alphacast Highlight: Argentina's crowding out boosts corporate debt market
By Mariano Sanchez Moreno (msanchez@alphacast.io)
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Crowding out skyrockets. The Treasury's need for financing, originated in sustained fiscal imbalances, leads the private sector to compete with the BCRA for scarce bank credit. That said, the Central Bank seeks to sterilize the inflationary impact of its monetary issuance. By the end of Sep-22, loans to the private sector represented 42% of deposits and 10% of GDP (vs. 76% and 11.4% in Dec-19, respectively). Likewise, the amount of pesos lent to the BCRA (ARS 7.97 tr) is outpacing private lending (ARS 6.4 tr) since May-21. This displacement of private credit by BCRA places corporate debt issuance as an alternative for firms to seek new forms of financing.
Investors see value in corporate Energy sector. From the investor's perspective, corporate debt (ONs) provide the possibility to dollarize and reduce exposure to sovereign risk. Investors prioritized staying in the short end of the curve (MD<2) in Q3 and demanding corporate fixed income from the energy sector as a hedging asset-class. Among the ONs with better relative performance were Vista Oil 2024 (VSC3O 4.7% vs 5% 6-month ma), Pan American Energy 2027 (PNDCO 7% vs 5.6% 6-month ma), Capex 2024 (CAC2O 9.7% vs 8.8% 6-month ma) and Tecpetrol 2022 (TTC1O 3.8% vs 4.7% 6-month ma). This demand, sustained during Q2 and Q3, takes place because they are less permeable than the national Treasury debt to political volatility and have revenues in dollars that would facilitate their access to foreign currency to honor their commitments.
YPF achieved credit upgrade, but exposed to local political risk. Last October 25, the state-owned oil company raised its local credit rating as a long-term issuer from AA+ to AAA (Fix - Fitch Ratings). According to the rating agency, the upgrade is based on the strengthening of its operational metrics and financial clean-up. In the secondary market and with respect to firms of the same sector and credit grade, YPF is trading with a spread in both yields and parities. With similar MDs, while Vista Oil 2024 yields 3.2% (parity 100.5%), YPF 2026 trades at 18.6% (parity 87%). With higher MDs the same occurs: PAE 2027 yields 6% (parity 109.7%) with respect to YPF 2029 around 22.4% (parity 62%). Although it maintains a leadership position in almost all the segments it operates, YPF is exposed to two events that seem to be influencing the performance of its ONs (YPF 2026 +58% YTD) more than WTI (+11% YTD). First, political volatility due to the fact that the Argentine State is the controlling shareholder of the oil company. Secondly, due to legal disputes abroad (Maxus and Burford). The uncertainty associated with these events is what seems to be pricing by the market both in both YPF's ONs and in their parities.
