Fitch has lowered the ratings of Colombian telecom operator Transtel Intermedia to D from C, it says. The move follows the company’s announcement that it is seeking to exchange its 12% 2016 senior notes with new senior secured step-up notes. The agency finds that offer “qualifies as a distressed debt exchange due to the diminished terms of the proposed notes.” Transtel has made the exchange offer during the 30-day grace period following a missed December 1 coupon payment, Fitch notes, and the company should be further challenged by a $4.5m maturity of a 2008 bond on December 31. In a tender launched Tuesday, Transtel offered holders of the 2016s an equal principle amount in step-up notes plus warrants for its common stock, in an exercise led by Morgan Stanley, expiring January 22.
Yearly Archives: 2008
Moody’s Negative on YPF, TGS
Moody’s has put the ratings of Argentina-based YPF under review for possible downgrade and chopped also TGS. The agency placed YPF’s on review because of deteriorating economic conditions in Argentina and the decline in global commodity markets, and also because of concerns that higher government revenue needs and an unpredictable government policy framework could lead to tax and regulatory changes that will pressure YPF’s financial profile and operating performance. The affected ratings are the Baa2 global local currency rating and the Ba2 foreign currency bond rating on $225m bonds due in February 2009. Moody’s also downgraded TGS’ foreign currency debt ratings to B2 from B1, as it expects the company’s export revenues to halve in 2009 because of this year’s drop in energy prices and an increase in export taxes. The outlook for TGS remains stable.
Moody’s Downgrades Banamex
Moody’s has chopped the long term global currency deposit rating to Aa3 from Aa2, but affirmed the prime-1 short term local currency rating and the C+ bank financial strength rating. The outlook is stable. Moody’s says that the lowering of Banamex’s GLC deposit rating reflects the downgrade of parent Citi’s financial strength rating to C from B and its baseline credit assessment to A3 from Aa3. Moody’s also says that the currency ratings remain constrained by the Mexican country ceiling for deposits and bonds, but that the bank’s credit strength is supported by an entrenched consumer business that provides the bank with stable, low-cost core funding and allows the bank to fund itself independently of its parent.
Moody’s Puts Brakes on Ford Mexico
Moody’s has chopped the long term Mexican national scale debt rating of Ford Credit de Mexico to Caa1.mx from Ba3.mx. The outlook is negative. The new long-term Mexican national scale rating indicates very weak creditworthiness relative to other domestic issuers. The cut comes after the agency downgraded parent company Ford Motor Credit’s senior unsecured rating to Caa1 from B3, with negative outlook.
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Crisis Uproots CentAm/Caribb Advantage
The global financial crisis has reversed the typical relationship between Central America/Caribbean credit and the bigger LatAm economies, which are beating the former on a returns basis. CentAm/Caribbean has historically been a diversifier that outperforms in a bear market and underperforms the rest of the region when markets go up. However the JPMorgan CACI index, which tracks CentAm/Caribbean sovereign and corporate credit, is down 18.7% in the year to December 18 on a USD total returns basis. This compares to a loss of 12.1% during the same period for the EMBIG, which tracks the bigger sovereigns. “The market is upside down. It’s not really fundamentals driving the market, it’s technicals,” Franco Uccelli, a VP for strategy in the LatAm research group, tells LatinFinance. “Once the market goes back to normal, we’ll return back to the normal trading performance of Central America and the Caribbean,” he adds. According to the analyst, this temporary dislocation will likely not be corrected until mid-2009 or H2. In the year to date, CentAm/Caribbean corporates have lost 28.8% and sovereigns declined 17.0%, according to the CACI. Grenada is down 51.9%, Belize off 46.0% and DomRep dropped 42.6%. The best performers were Costa Rica (-2.7%), Barbados (-6.9%) and Trinidad & Tobago (-7.0%), amid a flight to quality. Despite 2008 losses, investors should still consider CentAm/Caribbean credit for its typically low beta performance and the fact that it is less correlated to the wider market. “It’s a nice way to diversify your investment portfolio,” says Uccelli. A leading gripe from the buyside is lack of liquidity, and the last two months have been thin, but there is improvement. “We’re starting to see some liquidity coming back . . . that’s a good sign,” says Uccelli. The CACI was up 7.55% last year and returned 12.63% in 2006.
S&P Cuts DomRep Ratings
S&P has lowered the DomRep’s long-term sovereign credit rating to B (stable) from B+ due to a deteriorating economic outlook. Already in 2008, says S&P, fiscal slippage and high oil prices have led to an expected 4.5% of GDP general government deficit and 10% of GDP current account deficit. In 2009, S&P estimates that real GDP growth will slow to just 1%, led by diminished external demand. This, says the agency, is already seen with a sharp slowdown in tourism receipts, remittances, and free zone exports beginning in the second half of 2008. In addition, monetary tightening will dampen credit growth, consequently hurting domestic consumption and investment.
IMF Could Lend $800m to El Salvador
The IMF says it has agreed in principle to loan about $800m to El Salvador to support the country’s economic program for 2009. However, Savadoran authorities intend to treat the arrangement as precautionary and do not intend to draw on it, the IMF notes. An IMF spokesman says that the loan would have 5 instalments and a grace period of 2 years and 3 months. The repayment period is two years after each tranche. If El Salvador never uses the loan, it will pay a commitment fee of 0.25%, but if the country does draw, it will have to pay a variable interest rate that is currently around 1.5% plus a premium of 1.87% for the first tranche. Subsequent drawings, says the spokesman, will have an additional premium of 1.0%.
Citi Joins Caixa For Brazil Remittances
Citi has teamed up with Brazil’s Caixa Economica Federal to tap into the flow of remittances from citizens living abroad, a flow of roughly $7bn a year. The new service, which will be available in H1 2009, is intended to boost remittances by expediting the process and reducing operating costs. “This process is in line with the policies of governments worldwide, including the Brazilian government, of encouraging the use of formal tools to transfer such resources,” says Citi, which has been in the remittance market since 2006. There are over 4m Brazilian citizens living abroad, including over 1m in the US, 320,000 in Japan and 300,000 in Europe, says Citi. Economic downturns in the US and Spain, inflation and a weaker dollar will cause a fall in money transfers from LatAm migrants for the first time this decade, according to the IDB’s MIF unit. Migrants from LatAm and the Caribbean will send some $67.5bn to their homelands in 2008, against $66.5bn in 2007, some 1.7% less year-on-year when adjusted for inflation, MIF predicted in October. Until last year, remittances to the region had grown by double digits every year, says MIF, which says this is the first drop since it started tracking these flows in 2000.
Argentine Food Producer Eyes Bonds
Shareholders in Argentina’s Molinos Rio De La Plata have voted to issue up to $150m in bonds, the food conglomerate says. The sale could be in dollars or pesos, and in the local or international market. Details will be set at a later date, Molinos says.