Financing of the Non-Financial Public Sector: Amendment of Communication "A" 4838 and Related Communications

2009 - Year of Tribute to Raúl SCALABRINI ORTIZ

CENTRAL BANK OF THE ARGENTINE REPUBLIC

COMMUNICATION "A" 5015
10/12/2009

TO FINANCIAL INSTITUTIONS:

Ref.: Circular
OPRAC 1 - 635
LISOL 1 - 511

Financing of the non-financial public sector. Amendment of Communication "A" 4838 and related communications.

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We are writing to inform you that this Institution has adopted the following resolution:

"- Replace item 1.2.3. and the third paragraph of item 1.2.5. of Communication "A" 4838 (text as per Communications "A" 4926, 4937 and 4996), with the following:

"1.2.3. In the case of bridge loans or the subscription of provisional securities representing the debt of financial trusts constituted under the regime of art. 19 of Law 24.441, public trusts or fiduciary funds constituted under the corresponding legal framework, the placement of the debt instruments through a public offering or private placement is foreseen, within 365 days counted from the date of the granting of the financing by the financial institution.

In such cases, the provision of placement through a public offering or private placement shall be observed for the new issues of debt instruments of trusts or fiduciary funds constituted prior to 28.04.09, the pertinent modifications having to be incorporated into the original contract of the trust or fiduciary fund (or, as applicable, into the provisions governing them) for the purpose of having the placement indicated in the previous paragraph foreseen."

... ...

"1.2.5. …

When it concerns financing for trusts or fiduciary funds whose exclusive purpose is the issuance of debt instruments and the settlement of their financial services is effected with the proceeds of the receivables assigned in trust to it, in order to meet the funding needs demanded by the works and services included in this regime, provided that the other conditions set forth in this item 1. are met, said assignment as security or pledge shall not be required, to the extent that it is also verified that:

i) The cash deposits in financial institutions of the trust or fiduciary fund -exclusively intended to meet the financial services of its debt instruments- plus the future receivables represent at least 120 % of the sum of the amounts of the financial services (principal, interest and accessories) pending payment, and

ii) The settlement of the financial assistance or of the debt instruments issued by the trusts or fiduciary funds have the best or equal priority of collection with respect to the rest of the creditors, except with respect to the tax obligations of said trust or fiduciary fund.

The exclusive purpose and priority indicated above shall not be required when it concerns fiduciary funds created by national law prior to 28.04.09, without prejudice to the observance of the required coverage as provided in heading i)."

We also enclose for your attention the updated text of Communication "A" 4838 (as per Communications "A" 4926, 4937 and 4996).

We send you our best regards.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Darío C. Stefanelli
Manager of Issuance of Standards

José I. Rutman
Deputy General Manager of Standards

ANNEX

B.C.R.A.
FINANCING OF THE NON-FINANCIAL PUBLIC SECTOR
(text updated as per Communications "A" 4838, 4926, 4937, 4996 and 5015)
Annex to
Comm. "A"
5015

1. Establish that, within the framework of the provisions of Section 4. of the rules on "Financing of the non-financial public sector", the Central Bank of the Argentine Republic may authorize financial institutions to grant financial assistance to financial trusts constituted under the regime of article 19 of law 24.441, public trusts or fiduciary funds, in the case of the latter, established by national law or decree of the National Executive Power, constituted or to be constituted, whose final beneficiary or trust beneficiary, determined by the respective contracts or provisions governing them, belongs to the non-financial public sector, and/or subscribe debt instruments issued by them. Also included are the remaining trusts or fiduciary funds in which the works to be financed have said sector as their final recipient.

The authorization referred to in this item shall be granted on a general basis for each trust or fiduciary fund, covering both the initial incorporation of such financings into the financial institution's assets and those acquired through secondary negotiation.

For this purpose, all of the following requirements must be met:

1.1. The aforementioned trust or fiduciary fund:

1.1.1. Has as its purpose financing the execution of works and/or services related to infrastructure projects and/or the acquisition of equipment and/or guaranteeing the payments of the financial assistance granted and/or the debt instruments referred to in item 1. provided that the funds from the financing are applied to make capital investments that are declared as critical and/or of public interest by the competent authority, as being necessary for the provision of public services, regardless of the public or private legal nature of the provider.

1.1.2. Has a trust estate consisting of revenues and/or receivables arising from taxes, tariffs, fees, duties, specific charges or similar items or cash flows originating from forward energy supply contracts in which the administrator of the respective market is obliged to pay and such contracts are settled with funds from the items enumerated above.

Except in the case of national taxes, the specific allocation of which must be provided for by national law, for all other cases it will be required that the item intended to make up said entrusted asset have been previously established by the competent authority or by national, provincial, Autonomous City of Buenos Aires, or municipal ordinance law.

In all cases, the pertinent fiduciary assignment of the corresponding revenues and/or collection rights to the trust or fiduciary fund must be formalized, in accordance with the legislation mentioned above, which shall not be subject to liens or other restrictions affecting their free availability for the fiduciary within the framework of the rules governing the trust or fiduciary fund, except as provided in item 1.2.5.

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
(text updated according to Communications "A" 4838, 4926, 4937, 4996 and 5015)
Annex to
Comm. "A"
5015

For the purposes of the declaration of criticality and/or public interest and the determination of the items that make up the assets of the entrusted estate, as provided for in the preceding sections, a legal framework must be available that, as a general rule, defines the regulatory and control structure of the corresponding service - national, provincial, Autonomous City of Buenos Aires law, municipal ordinance, depending on the jurisdiction of the trust or fiduciary fund beneficiary - which designates the application authority with powers in matters of regulation, control, price setting, financing methods, etc.

1.2. The constitutive instruments of the trust or fiduciary fund provide that:

1.2.1. The collection or integration of the items intended for the assets of the entrusted estate according to item 1.1.2. is carried out together with the settlement of the other concepts that must be paid to receive the corresponding services and are transferred directly by the administrator or person in charge of collection to the fiduciary account without prior crediting of such items in any other account of another ownership.

1.2.2. The effective settlement - to the users or final recipients of the services - of the concepts that make up the assets of the entrusted estate according to item 1.1.2., is not conditioned, under any circumstances, to the progress of the works and/or the prior acquisition of the equipment being financed.

1.2.3. In the case of bridge loans or the subscription of provisional securities representing the debt of financial trusts constituted under the regime of art. 19 of Law 24.441, public trusts or fiduciary funds constituted under the corresponding legal framework, the placement of debt instruments through public offering or private placement is foreseen, within 365 days counted from the date of the granting of the financing by the financial entity.

In such cases, the provision for placement by public offering or private placement must be observed for new issues of debt instruments of trusts or fiduciary funds constituted prior to 28.04.09, and the pertinent amendments must be incorporated into the original contract of the trust or fiduciary fund (or, as the case may be, into the provisions governing them) so that the placement indicated in the preceding paragraph is provided for.

1.2.4. The issuance conditions of the debt instruments issued by the trusts or the conditions of the financial assistance must establish a payment schedule for the cancellation of such financings within a term no greater than 12 years, counted from their corresponding date of issuance or disbursement of the financial assistance, through the application of the flow of income computable for the purposes of point 1.2.5.

1.2.5. The financial entities that grant the financial assistance or are holders of the debt instruments referred to in point 1. of this regime must have an assignment in guarantee or pledge in their favor over cash deposits in financial entities of the trust or fiduciary fund -destined exclusively to

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
(text updated according to Communications “A” 4838, 4926, 4937, 4996 and 5015)
Annex to
Com. “A”
5015

meet the financial services of its debt instruments- and/or the collection rights that make up the assets of the trust patrimony.

Such guarantee must be, at all times, at least 120% of the sum of the amounts of all financial services (principal, interest and accessories) pending payment corresponding to the financial assistance granted and/or holdings of debt instruments referred to in point 1. of this regime according to the established payment schedule.

When it concerns financing to trusts or fiduciary funds whose exclusive purpose is the issuance of debt instruments and the cancellation of their financial services is made with the proceeds of the collection rights fiduciary assigned to it, destined to meet the fund needs demanded by the works and services included in this regime, provided that the other conditions set forth in this point 1. are met, such assignment in guarantee or pledge will not be required, to the extent that it is also verified that:

i) The cash deposits in financial entities of the trust or fiduciary fund -destined exclusively to meet the financial services of its debt instruments- plus the future collection rights represent at least 120% of the sum of the amounts of the financial services (principal, interest and accessories) pending payment, and

ii) The cancellation of the financial assistance or of the debt instruments issued by the trusts or fiduciary funds shall have the best or equal priority of collection with respect to the rest of the creditors, except with respect to the tax obligations of said trust or fiduciary fund.

The exclusive purpose and priority indicated above shall not be enforceable when it concerns fiduciary funds created by national law prior to 28.04.09, without prejudice to the observance of the coverage required as provided in section i).

For the purposes of determining the coverage of the debt of the trust or fiduciary fund according to the situations provided in this point, the pertinent information supplied by the competent authority must be used, according to the corresponding regulatory and control structure that governs the activity of the sector to which the works whose construction is financed correspond.

1.3. In the instrumenting of the assignment to the fiduciary of the concepts provided in point 1.1.2. in favor of the trust, it is established that the income to be applied to the cancellation of the collection rights assigned to the trust or fiduciary fund shall be received by the latter through direct transfer of the funds to the fiduciary account by whoever has the character of administrator or person responsible for the corresponding collection, without prior credit in any other account.

1.4. The income from the obligors for the payment of the rights assigned to the trust or fiduciary fund, considered individually, at the date of constitution of the respective trust or fiduciary fund, shall be computed for up to a participation no greater than 2.5%

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
(text updated according to Communications “A” 4838, 4926, 4937, 4996 and 5015)
Annex to
Com. “A”
5015

of the total of the amounts corresponding to the projected demand of the corresponding service.

In those service provisions in which there are companies that have the character of distributors, the rights assigned of the respective obligors for payment shall be computed without exceeding the individual participation percentage less than or equal to that established above.

1.5. When the subscription of the debt instruments is carried out privately, it shall have a special report of external auditor, registered in the Special Registry of the Central Bank of the Argentine Republic, with a conclusion on the existence or not of observations to the compliance with the preceding requirements provided in this regime, according to the model that is made known in due course on the compliance with said requirements. This report shall also be necessary for the granting of the financial assistance.

Likewise, this requirement must be complied with when the subscription of the debt instruments by public offering is foreseen and there is not yet the issuance prospectus authorized by the National Securities Commission and/or by Stock Exchanges as applicable and/or with the required risk rating report on the debt instruments of the trusts or fiduciary funds.

The presentation to the Central Bank by the financial entities of special reports that contain observations shall not be admitted.

The special report of external auditor shall not be necessary when any of the remaining elements indicated are available, in which case the verification of compliance with the requirements shall be carried out by the financial entities involved in the operation on the basis of the information arising from them. When this is not possible, the special report of external auditor must be required.

1.6 The debt instruments provided in the preceding point whose placement is carried out under the public offering regime must have a rating not lower than “BBB+” granted by a report of a risk rating agency admitted by the Central Bank.

1.7. The provisions of points 4.1.2. and 4.1.3. of Section 4. of the rules on “Financing to the non-financial public sector”.

2. Provide that, in the case that the trust or fiduciary fund is of the non-financial public sector of the provincial, municipal or Autonomous City of Buenos Aires jurisdictions, those jurisdictions must pledge in guarantee the resources provided by sections ii) and iii) of point 4.1.1.1 of Section 4. of the rules on “Financing to the non-financial public sector” -even in excess of the term established in said sections-, until reaching the sums necessary to cover the totality of the income that the trust or fiduciary fund would receive while those works or equipment have not begun to be used economically - generating income to the trust through the rates, tariffs, and other similar concepts- and in the proportion of the holding of the corresponding instrument with respect to the total assets of the fiduciary patrimony.

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
(text updated according to Communications “A” 4838, 4926, 4937, 4996 and 5015)
Annex to
Com. “A”
5015

3. Provide that the financial assistance granted and/or the holding by the financial entities of debt instruments and/or debt instruments issued by trusts or fiduciary funds within the framework of the provisions of point 1. of this regime shall not be covered by the general rules in force on “Credit Grading”.

4. Increase by 15 percentage points the individual limits for transactions with the non-financial public sector provided for in subparagraphs i) to iii) of point 7. of Communication “A” 3911 and amendments, and by 50 percentage points the global limits established therein -second paragraph of subparagraph iii) and subparagraph iv)-, to the extent that the increases in each jurisdiction are applied to the financial assistance granted or to the holding of debt instruments issued by trusts or fiduciary funds under the provisions of point 1. of this regime or to financing established under point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector”.

For those entities that record excesses admitted to the credit limits with the non-financial public sector provided for in point 7. of the resolution disseminated through Communication “A” 3911, the expanded individual credit quotas provided for in the preceding paragraph shall be up to the amount resulting from the positive difference between 15% of the computable net worth and the excess admitted to each individual relationship provided for in that point 7. This is without prejudice to the possibility of reinvesting the capital amortizations of the public debt instruments referred to in point 8. of the resolution disseminated through Communication “A” 3911. Likewise, for these entities, the increase in the global credit quotas provided for in the preceding paragraph shall not apply.

For the purposes of calculating the general and expanded limits mentioned above as well as the limit provided for in point 12. of Communication “A” 3911 and amendments, the financing referred to in point 1. of this regime shall be computed at:

4.1. 25% of its balance for all concepts, when it refers to the first and second paragraphs of point 1.2.5.

4.2. 50% of its balance when the situation provided for in subparagraphs i) and ii), both corresponding to the third paragraph of point 1.2.5, occurs.

4.3. 75% of its balance when the situation provided for in the fourth paragraph of point 1.2.5 occurs.

5. Increase by one time the limits established regarding risk concentration -points 2.2.1. and 2.2.2. of Annex II of Communication “A” 2140-, setting them at 4 times and 6 times, respectively, the computable net worth of the entity as of the last day of the month prior to the corresponding month, when the excesses to the limits provided for generally in said regulations originate as a consequence of the application of the provisions referred to in point 1. of this regime and/or point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector”.

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
(text updated according to Communications “A” 4838, 4926, 4937, 4996 and 5015)
Annex to
Com. “A”
5015

6. Provide that, in the month prior to that in which the financial assistance is made or each subscription of debt instruments and/or debt instruments of the trusts or fiduciary funds referred to in point 1. of this regime is made, the financial entity that uses the expanded credit quotas referred to in points 4. and/or 5. must record a minimum capital integration excess that exceeds at least the sum of the amount corresponding to that subscription plus its accumulated holding, as of that date, of such types of instruments.

Additionally, in the Business Plan and Projections submitted by that financial entity, in compliance with the provisions of the information regime on that matter, in force at the time of evaluation by the intervening financial entity, a projected monthly excess of minimum capital integration -individual position- must arise for the reported periods of such magnitude that it allows eventually absorbing the greater minimum capital requirement derived from the incorporation as “INC” referred to in point 7. of this regime. When the information corresponding to said projections refers to a half-year period, the projected computation to be considered must be proportional.

7. Incorporate within the expression “INC” (increase in minimum capital for credit risk) provided for in point 3.1. of Section 3. of the rules on “Minimum capital of financial entities” the excesses to the financial assistance granted or to the holdings of debt instruments of trusts or fiduciary funds referred to in point 1. of this regime and point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector” for the portion of the holding allocated to the expanded credit quotas referred to in points 4. and/or 5. computed according to the following schedule, which shall operate from the time the works have begun to be economically used or the equipment generates income for the trust or fiduciary fund through tariffs, rates, fees or other similar concepts.

Computation as “INC” of the use of the expanded quota -in % of said utilization-	From
25	First month
50	Seventh month
100	Thirteenth month

8. Authorize, on a general basis, within the framework of the rules on “Afectación de activos en garantía” that national public securities - which have volatility reported by this Central Bank - and/or the monetary regulation instruments of the Banco Central de la República Argentina be pledged as collateral by financial institutions in favor of this Institution by virtue of what is required by regulation for operations instrumented through the ALADI Reciprocal Payments and Credits Agreement, to the extent that they are linked to infrastructure or equipment works - which, in both cases, constitute capital investments - referred to in point 1. of this regime as regards the type of work and/or equipment, regardless of the form in which their execution or acquisition and their financing are instrumented, and therefore, in accordance with the rules currently in force on the matter, they are subject to the limit provided in point 3.1.1. of the aforementioned regulations.

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
(text updated according to Communications “A” 4838, 4926, 4937, 4996 and 5015)
Annex to
Com. “A”
5015

9. Increase by 50 percentage points the limit provided in point 4.1. of Section 4. of the rules on “Relación para activos inmovilizados y otros conceptos” to the extent that the immobilization of the asset originates from the holding of national public securities and/or monetary regulation instruments of the Banco Central de la República Argentina pledged as collateral within the framework of the operations referred to in point 8. above.

10. Establish that the provisions contained in points 1. to 7. and 9. of this regime must be observed by financial institutions on an individual and consolidated basis, except for the provisions of the second paragraph of point 6. of this regime, which must be complied with on an individual basis.

11. Admit the coverage of guarantees for import operations processed through the ALADI agreement, within the framework of the provisions of point 8. of this regime, for at least 100% of the corresponding amount, to the extent that the financial institution authorizes the Banco Central de la República Argentina to debit on a daily basis from its demand account in U.S. dollars and, if necessary, to debit from its current account in pesos or, if the available balances in the aforementioned accounts are insufficient, that it authorizes the liquidation in the secondary market of its holdings of public securities - which have volatility reported by this Central Bank - and/or monetary regulation instruments, deposited in the “Central de registración y liquidación de pasivos públicos y fideicomisos financieros” (CRyL) to cover the collateral shortfall, through their pledge, which may occur due to price variation of public securities quoted in institutionalized markets or due to the applicable exchange rate, it being possible to release and reinstate the excess collateral when it exceeds 105% of the guaranteed amount.