Tecpetrol plans to use the loan to pay on November 12 all the outstanding principal and interest on its series I-III bonds, which mature in February 2008, the company said in a statement to the Buenos Aires stock market.
Private sector Dutch bank ABN-Amro and Holland's state-owned FMO bank are organizing the loan, the source said, adding Tecpetrol's current target for the credit is US$170mn, which it could increase to US$200mn if conditions allow.
The idea is for Tecpetrol to take advantage of the improving international market for Argentine oil exporters to access foreign debt financing, thereby extending the company's debt maturities and reducing interest payments, the source said.
"Today is a different context from a couple of years ago - the market is recovering for a certain group of companies," the source said.
The loan will be for seven years, extending the debt maturity from 2008 to 2011 and at a lower interest rate, the source said, without disclosing the rate.
After the bonds are paid, the remaining funds from the loan will be used to finance investments in oil exploration and production in Argentina, according to the source. "You can see the market has an appetite for Tecpetrol debt, so this allows us to improve the economic conditions of the company," the source said.
Argentine oil exporters are benefiting from high crude prices internationally and "today we are beginning to see more financing alternatives for Argentine crude exporters," the source said, adding: "There are financial entities interested in export commodities like this."
"Argentine exporters can generate income overseas so an exporter has certain privileges that a utility does not, and the market is coming back for those sectors that show strength to mitigate the [country political] risk even in a context in which there are export taxes," the source said.
High international oil prices are providing an added boost for Argentine oil exporters, which are allowed by law to keep 70% of their export revenues overseas.
Tecpetrol recently confirmed the reorganization of the oil and gas business of its controller, Argentine industrial holding company Techint.
Techint is in the process of relocating its subsidiary Techint Investments NV, currently based in the Dutch Antilles, to Spain to manage its Latin American investments.
Techint Investments NV controls Tecpetrol and the group's other Latin American units. Techint Investments NV has also bought a 90% stake in Tecpetrol's subsidiary Tecpetrol International, which owns subsidiaries in Colombia, Mexico, Venezuela, Ecuador, and Peru.
The deal will remove Tecpetrol Argentina's international subsidiaries, but will not affect the company's Argentine operations, the source said.
"For us it is not an operating issue, it is more of a societal issue within the Techint group," the source added. As a result of the reorganization, the Argentine office of credit ratings agency Fitch Ratings recently lowered its local scale ratings on Tecpetrol's US$189mn bonds, including the series I-III bonds due February 2008, to A+(arg) from AA-(arg). The rating also applies to US$15mn of series IV debentures that mature November 29 this year and US$20mn of series V debentures that mature June 2007.
All are part of a US$400mn Tecpetrol debenture program. Tecpetrol currently has a total debt of some US$230mn, the source said.
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