Argentine laws and regulations governing the issue of debt securities have undergone a substantial liberalisation in recent years. Economic Emergency Law No. 23,697 introduced greater flexibility in the issuing of securities by allowing, among other things, the issue of debt securities of different types.
Due to the flexibility and tax benefits, the most common debt securities currently traded in Argentina are corporate bonds regulated by Law No. 23,576, as amended (the Corporate Bonds Law). Corporate bonds may be issued by corporations, co-operative entities, civil associations, and branches of foreign companies in local or foreign currency with place of payment in Argentina or abroad, and are freely transferable into and out of Argentina. Corporate bonds may or may not be convertible into common stock, and bear interest at floating or fixed rates.
The broader utilisation of corporate bonds was further promoted by amendment to the Corporate Bonds Law permitting corporate bonds issued by Argentine companies to be exempt from various taxes, including withholding tax and taxes on capital gains, upon observing the requirements of such law. In order to be subject to tax exemptions, the public offering of the corporate bonds must be duly authorised by the CNV and such securities must comply with several requirements of the Corporate Bonds Law.
In particular, the corporate bonds must (i) be publicly offered and placed to investors, (ii) comply with those requirements relating to maturity (corporate bonds must have a 31-day minimum maturity), and (iii) observe the use of the proceeds provisions of the Corporate Bonds Law (ie working capital, refinancing liabilities, investment in fiscal assets located in Argentina, and capital contributions to controlled or affiliated companies using such proceeds for the foregoing purposes), including announcing the use of proceeds to investors in the disclosure document and certifying the use of proceeds to the CNV.
Under Decree No. 656/92, most publicly offered corporate bonds must be rated by two independent Argentine rating agencies. Rating agencies must submit for CNV approval outlines concerning the standards used in the establishment of ratings. Decree No. 656/92 provides that debt securities shall be rated in five categories, A through D, within which there may be subcategories. Rating categories are ranked in order of decreasing quality and increasing risk. Categories A through D correspond to debt securities which fulfil all rating information requirements. Category E applies to all debt securities which fail to fulfil information requirements.
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