Galicia seeks rescue abroad

Tuesday, February 26, 2002

Argentina's largest private bank Banco Galicia is looking for an international strategic partner to bail it out after negotiations with the Argentine Central Bank over a debt-for-shares swap failed, the Wall Street Journal of the Americas reported.

Galicia was one of the banks most affected by the massive deposit flight in November last year, which prompted former President Fernando de la Rua to impose deposit and capital controls, which are still in place today.

Galicia had been in talks with the Central Bank for some time. However, the Argentine government has publically stated that it does not plan to take over private banks.

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Galicia board member Daniel Llambias said that Galicia sent executives on Monday to the US and Europe in order to offer its private creditors a stake in the bank in exchange for some of Galicia's outstanding debt.

Galicia has some US$1.7bn in dollar-denominated debt and it is believed that it will seek to swap part of that debt in exchange for a controlling interest in the bank.

Galicia's international rescue operation will be difficult to execute because of the dismal state of the Argentine economy and the highly delicate state of Argentina's banking sector, according to market observers.

Galicia is controlled by financial group Grupo Financiero Galicia (Nasdaq:GGAL), which holds 94% of the bank's shares.