Argentina: Initial Offering of Securities

Last Updated: 23 June 2016
Article by Roberto E. Silva, Jr.

The Argentine Securities Commission issued General Resolution CNV No. 662 amending the regulations for placement of securities.

On May 5, 2016, the Argentine Securities Commission (Comisión Nacional de Valores or "CNV"), issued General Resolution CNV No. 662 (the "Resolution"), modifying the rules regarding the placement of securities. The Resolution states that the initial placement of publicly offered securities authorized by the CNV may now be carried out either through book building, or through auction or public tender, both of which shall be carried out through a computer network system. Consequently, General Resolution No. 597, which abrogated the book building system in use at that time for the initial placement of shares and notes, is now itself abrogated (for further details regarding General Resolution CNV No. 597, please refer to issue # 112 of Marval News, in which we analyzed such resolution). The Resolution was published in the Official Gazette on May 9, 2016.

The Resolution maintains the requirement that the initial placement be made through the computer network systems made available by the Markets authorized by the CNV, after prior fulfillment of the requirements set forth in the General Resolution No. 622/2013 of the CNV, as amended and restated, (the "CNV Regulations").

The main aspects of the Resolution are as follows:

1. Within 15 days of placing the securities, placement agents must assure the issuers of the efforts made in the initial placement of the securities through the mechanisms provided for this end by CNV Regulations.

Likewise, the Resolution states that the execution of a placement agreement shall be considered sufficient towards the fulfillment of the public offer requirement if the placement agent made all the placement efforts provided for by the CNV Regulations.

In debt restructurings, the requirement of public offering shall be deemed fulfilled when the subscribers of the new offer are the current holders of the notes being exchanged.

2. The Resolution increases the minimum subscription amount of the initial offering. The minimum, previously set at AR$ 10,000, is now raised to AR$ 20,000. The Resolution maintains the exception to the minimum in cases in which the issue is made under the terms of Communication "A" 3046 of the Argentine Central Bank, or in cases when it is aimed at qualified investors.

3. The Resolution states that, notwithstanding the Market selected for the initial placement, in the frame of the interconnection of the computer network system required for the Markets, all negotiation agents ("Agentes de Negociación") and settlement agents ("Agentes de Liquidación y Compensación") registered with the CNV and the members of the Markets may place offers in the auction or public tender, or indications of interest in the book building system.

4. The Resolution shortens the offering period, setting it at a minimum of 3 business days (previously it was 4 business days) prior to the date of the auction or public tender or the subscription or allocation in the case of book building.

The term for the invitations to make offers may be reduced to one business day in the case of Issuers who fall into the category of "Frequent Issuers".

The Resolution states that "Frequent Issuers" shall be those issuers of shares or notes contemplated in the general public offer regime, and; those who have made at least 2 placements of shares and/or notes under the general public offer regime in the 12 months prior to the initiation of the term of invitations to make offers.

5. Regarding the initial placement of shares, the Resolution states that it refers to the cases in which there is a remainder after all of the shareholders' preemptive rights have been exercised, or in the event of a waiver or assignment of said rights to intervening agents, to all shares received in such nature.

6. Regarding the auction and public tender, the Resolution maintains the regime set forth by the previous regulation, with a few innovations:

  1. Offers may not be rejected, unless they contain any errors or data omissions which make their processing by the system impossible, or due to the non-compliance of regulatory requirements regarding the prevention of money laundering and financing of terrorism.
  2. On the other hand, it established that the publication of the results of the auction or public tender must be made on the same date of the closing through the CNV's web site (the "AIF" or "Autopista de la Información Financiera") and through the Market's website, including at least the total amount offered, the price and/or interest rate and the final amount placed.
  3. Likewise, the existence of a chronological order of preference in favor of those who place the first binding offers is established as a possibility.

7. The following is established regarding book building:

  1. Indications of interest shall be considered offers once they are ratified and entered into the systems thus acquiring the nature of final and binding. The investor may waive his or her right to ratify indications of interest, thus making them binding.
  2. The system may use rules of proportionality, pro rata or weighting formulas for allocation. In all cases, the allocation standards used to allocate the securities shall be detailed in the prospectus or the pricing supplement.
  3. Indications of interest may not be rejected, unless they contain any errors or data omissions which make their processing by the system impossible, or due to the non-compliance of regulatory requirements regarding the prevention of money laundering and financing of terrorism.
  4. The prospectus or pricing supplement may contemplate guidelines for the non-allocation of offers.
  5. The allocations must be made at a uniform value for all participants allocated.
  6. The same conditions that are applied to auction or public tender apply to the publication of the placement results.
  7. The requirement of a non-competitive section which may not be comprised of more than 50% of the total securities allocated is not required for book building. This requirement was in the CNV Regulations and is maintained by the Resolution for the case of auction or public tender.
  8. The Resolution states that the book building system may be in charge of placement agents abroad when the placement of the securities is carried out in an/other country/countries, as long as these countries have regulatory standards that comply –according to CNV criteria- with internationally recognized standards in the matter and as long as all the other conditions set forth by the Resolution are complied with. Likewise, the Resolution states that the placement agent abroad shall designate an Agente de Negociación and Agente de Liquidación y Compensación, registered before the CNV, as his or her representative in the country in order to receive local indications of interest.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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