Argentina's TGS may refinance bonds if spreads move tighter
By Paul Kilby
BUENOS AIRES, March 9 (IFR) - Argentine gas distributor TGS can meet around US$240m in bond payments in coming years but may consider refinancing options if spreads keep pushing tighter, a source at the company told IFR.
Cash flow can cover principal payments on amortizing bonds due 2017 and 2020, but TGS might "look at the possibility of lowering rates to reduce the cost of financing," he said.
TGS enjoyed stronger-than-expected results in the fourth quarter with Ebitda of Ps461m (US$30m), but the predominance of dollar debt on its balance sheet meant its net income took a substantial hit following Argentina's devaluation in December.
While dollar debt carries its own risks, cheaper rates and the longer tenors available abroad may be enticing enough to encourage TGS to return to the international capital markets.
The borrower still has some US$180m in payments due on the 2020s and another US$60m on the 2017s.
The 9.625% coupon on the 2020s looks particularly expensive, and it may make sense to tap the market for cheaper money if yields on Argentine assets shrink.
The 2017s were quoted at 9.4%-7.8% on Tuesday, while the 2020s were hovering around 9.2%-8.9%, according to Thomson Reuters data.
Argentine bond spreads have narrowed in recent weeks in anticipation of a 12-year debt saga with holdout investors being resolved, but upside has been capped by the threat of more supply from the sovereign, provinces and corporates this year. Continuación...