Acquisition Via Structured Notes


Perez Companc, the Argentine energy company, launched an unusual $101 million structured note transaction in the local market last week through Morgan Stanley.

While the structure was straightforward, its purpose was more complex. The deal was created solely to enable Perez Companc to acquire shares in Edesur, one of the main electricity distribution companies in Argentina.

The asset type itself - promissory notes - is not new - but it may mark the first time that structured finance has been used in Argentina expressly for the purpose of financing an acquisition, sources said.

Perez Companc has essentially securitized its own promissory notes issued to Entergy, which owns 5% of Edesur. With the proceeds from the structured deal, Perez Companc will purchase all of the shares in Edesur that Entergy owns.

The transaction will also provide Perez Companc with certain tax advantages under Argentina's trust law, a source said.

The three-year structured notes, which mature around the same time as the underlying promissory notes, will be issued through Morgan Stanley's debt "conduit," called the LS Program and sold to domestic investors in Argentina. Standard & Poor's is expected to rate the notes AAA on the local scale, based primarily on the corporate credit rating of Perez Companc, which is also AAA.

Although the local and international markets were somewhat volatile last week, investors had been lined up for the deal well in advance. In fact, the transaction was delayed from earlier this year, largely due to the public outcry after a long blackout in regions served by Edesur, including Buenos Aires. - JB