Milei’s first Argentina privatisation beset by US$536-million debt

President Javier Milei is imposing a December deadline on Argentina’s first bid to sell a long list of state-run companies to the private sector, outlining how challenging it will be for the government to unload businesses. 

The privatisations are part of Milei’s aggressive austerity campaign that he symbolises with a chainsaw. He doesn’t believe the government should run companies, and says repeatedly that “everything that can be privatised, we’re going to privatise.” Milei is hoping to sell off state-run railways, banks, an airline and much more. 

His administration chose hydroelectric construction company Industria Metalurgicas Pescarmona, or IMPSA, as its first privatisation target. And it’s held negotiations with a prospective buyer: Industrial Acquisitions Fund, a US special purpose vehicle that acquires and revitalises companies in the energy and infrastructure sectors, according to a person familiar with the matter. 

But the catch is that IMPSA still owes creditors US$536 million and IAF wants those debts out of the way before buying the company, according to the person, who asked not to be identified as the process is ongoing. IMPSA is mostly owned by the national government and the provincial government of Mendoza, where it’s headquartered. 

The company is a microcosm of Argentina’s own sovereign debt debacles. IMPSA restructured its debts twice in the past decade, while its international bonds account for 38.4 percent of its portfolio and are being currently offered at only one tenth of their issue value. 

Milei’s administration is imposing a deadline: IMPSA must be privatised by December 15, or else it will go into bankruptcy, according to the person. To resolve the debt burden, IAF hired Buenos Aires-based brokerage AdCap Securities Ltd. before it acquires the company. 

AdCap declined to comment on what the exact solution to the debt would look like. IMPSA, IAF, and Argentina’s Economy Ministry didn’t respond to requests for comment. 

The IMPSA case exemplifies the challenges Milei faces in untangling Argentina’s government from its cobweb of companies. Labor protests this year have hampered service at state-run airline Aerolíneas Argentinas and the largest public employer, railway giant Trenes Argentinos. The president recently started the process of auctioning off the country’s cargo rail company, but a prospective buyer would face a network in deep disrepair.   

Established in 1907, IMPSA was founded in Argentina’s main wine region of Mendoza, where it built iron, steel and irrigation equipment partly for vineyards. More recently, it’s focused on hydroelectric projects and heavy machinery at cargo ports.