Exchange control complicates companies in paying debt to investors

A debt maturity of USD 130 million that IRSA faced today did not reach the holders of the Negotiable Obligation abroad. The reason is that the control of changes, as the regulation is written by the Central Bank, prevents making payments to "legal persons".

The money must be turned into an international clearing house (in this case Clearstream), which is a company that maintains custody of the ONs issued by IRSA. Then he is responsible for distributing the payments among each of the investors who have their credits in international accounts.

Of the USD 130 million already paid by the company chaired by Eduardo Elsztain, an estimated USD 35 million has already been deposited in the accounts of investors, since they have their titles in custody in Caja de Valores. But most – around US $ 95 million – of the issuance of the ON is "housed" in an international depository company.

Now it must be the Central who resolves. Or the regulations are changed so that the draft can be made effective or the only way that investors would have left is to transfer their bond holdings to the Caja de Valores, that is, the custody passes to a local entity.

One of the explanations is that if the money is turned abroad it will directly impact the reserves. On the other hand, if it remains in the local market, the effect would be less. Time is short as IRSA could suffer a downgrade in case of not being able to meet the payment of its obligations, even though the money was already deposited in the Caja de Valores to pay the bondholders.

The exchange control that was in force between 2011 and 2015 allowed companies to pay their debts normally abroad and this happened during those years without inconvenience. That is why it is estimated that the Government will modify the wording so that companies can normally comply with the payment of debts in dollars.

The only two reasons that allow companies to access the formal exchange market are: cancellation of debts incurred in foreign currency or imports. In addition to IRSA, the main local banks and companies such as Pampa, Edenor, Telecom or YPF must resort to the foreign exchange market to pay abroad, so their investors will also be aware of the situation.

There is also a sensitive issue with the payment of Letes that the Treasury must make today and those that come ahead. The problem is similar to what IRSA faces. If the holder of these short-term securities transferred his tenure to Euroclear (that is to say in a depository outside Argentina) it will be considered a "legal person" and will be "reperfiled", that is, it would only charge 15% immediately. Therefore, many chose to transfer their ownership to the local market to obtain funds without inconvenience.