Charlemagne Capital, the UK-based investment manager, is launching a $50m Argentine Recovery Fund which will invest in debt and equity structures of distressed companies in Argentina.
The fund represents the first step beyond the firm's traditional focus on Eastern and Central European emerging markets, which the firm has targeted for nearly a decade. According to Charlemagne Capital director Nicholas Edwards, the recent economic and financial turmoil in Argentina has presented a once in a generation decline in investment valuations. “Equity values have fallen to zero and debt is trading well below par in fundamentally strong companies.”
Charlemagne Capital is looking to raise $50m over the next three to six months that it will use to participate in and lead debt-for-equity swaps in firms with a 'proven ability to generate reliable revenues'. The firm believes such transactions will play an increasingly important role in the Argentine economy as it struggles to deal with the implications of the abandonment of the policy of pegging the Peso to the Dollar. 'The Peso has fallen from parity to 3.6 to the Dollar, which has put significant pressure on the balance sheets of all companies with dollar liabilities”
Edwards believes that the optimum time for investments in Argentina will arrive in six to nine months time when the current downturn has fully taken its toll and political uncertainty has been removed. 'We are very flexible about the size of our investments and the number of investments we will make because, apart from knowing that opportunities will present themselves, it is difficult to gauge just how deep the financial and therefore banking crisis will go.'
Charlemagne Capital will be supported by its local advisor, investment bank Integra Investment, which is led by former Interior Minister Luis Manzano and Arturo Rubenstein, former director at Templeton Global Investment.
The firm is looking to attract investors primarily from Europe although the firm may also look to the US and Middle East for investors. 'There is no doubt that this is a high risk fund and investors will need to have an appetite for the region,' adds Edwards. 'If we were to make ten investments, it is possible that three could fail, but the seven that succeed could bring tenfold returns and that's what we're targeting.'