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Pampa Energia debt shelf sparks M&A talk

By Paul Kilby

NEW YORK, Jan 26 (IFR) - Pampa Energia's shareholders have approved a US$500m debt program, raising speculation that the Argentine utility is accumulating a war chest for an acquisition of Petrobras assets.

Pampa CEO Marcelo Mindlin has expressed an interest in buying the Brazilian oil company's Argentine assets.

And local press reported the company had been analyzing an offer for a stake of slightly more than 60% for US$1bn-US$1.3bn.

"They were bidding for Petrobras assets, so you can assume there is an acquisition finance behind that (debt shelf) and possibly a bond take-out," said a DCM banker focused on Argentina.

Analysts at Raymond James wrote last month that acquiring an up to 67% stake in Petrobras Argentina could be financed through debt and the sale of assets, given the credit's low leverage.

As of the third quarter last year, the company had a net debt to Ebitda ratio of just 0.1 times, which would jump to around 1.3 times if it bought 67% of Petrobras in the US$1bn-US$1.3bn range, the analysts said.

Pampa is the country's largest electricity company and is expected to benefit from the eventual lifting of utility tariffs as newly installed President Mauricio Macri looks to establish more market-friendly policies.

Changes to the existing tariff structure are expected to be announced as soon as February, as part of the government's effort to cut the growing fiscal deficit.

"We favor Pampa as it offers exposure to the generation sector, which we believe will be the best-performing segment in the industry, while benefiting from the improvement in profitability in the other businesses (transmission and distribution)," said Raymond James.

The company's early-stage backers cashed in on those prospects late last year through an all-secondary US$74.6m follow-on offering.

Bank of America Merrill Lynch was sole bookrunner.

Yet while market optimism about policy changes in Argentina is high, sliding crude prices and broader volatility is likely to up the cost of any bond take-out.

"It is still Argentina and it is still high-yield," the DCM banker said.

"The US high-yield market is not healthy at the moment, and I don't think the tariff issue alone will drive values."

Possible comps for Pampa Energia include other Argentine utilities such as Transener, TGS and Edenor.

According to Thomson Reuters data, those companies have 9.75% 2021s, 9.625% 2020s and 9.75% 2022s trading at mid-market yields of around 11.20%, 9% and 9.8%, respectively.

(Reporting by Paul Kilby; Editing by Marc Carnegie)