Argentina discusses raising US$1 billion through Santander

Argentina’s government is in talks with Banco Santander SA for a potential US$1-billion loan, part of President Javier Milei’s move to secure cash ahead of a January debt payment, according to people familiar with the matter. 

Santander would act as the manager of a special purchase vehicle in the deal, which would take the form of a repurchase agreement, or ‘repo,’ said the people, who asked not be named because discussions are private. 

Government or Central Bank bonds will be offered as collateral, they said, adding that the Spanish lender is pitching the transaction to international and local money managers to weigh their interest in participating as a way of sharing the risk. 

Representatives for Argentina’s Central Bank and Economy Ministry didn’t reply to requests for comment. Santander declined to comment. 

Repos, as they are known, are commonly used to raise short-term capital. In the United States, the US Federal Reserve turns to the repo market as a tool to help implement monetary policy. In Argentina, the administration of former president Mauricio Macri took on repo loans with international banks to raise billions of dollars. 

The structure under discussion in this deal includes a floating interest rate of 550 basis points over the Fed’s Secured Overnight Financing Rate on a loan maturing in 2027, according to a term sheet seen by Bloomberg. It includes a two-percent commitment fee and a six-month window during which the government could draw on the line, according to the terms. 

The structure is subject to change, the people said, adding that discussions over the potential transaction are preliminary.

Economy Minister Luis Caputo told brokers in Argentina late last month that the government had an agreement with international banks on a repo line and the funds would go toward US$4.7 billion in payments due in January on hard-currency bonds, according to people who attended the meeting. 

The repo line would signal that officials are keen to service bond payments. Since taking office last year, Milei and Caputo have tried to reassure debt holders that the country will make good on its obligations. 

Investor confidence, however, has taken a hit in recent weeks as authorities burned through foreign currency reserves to prop up the currency in parallel markets.