Continuing the trend of LatAm corporates expanding beyond region, Mexico’s Grupo Bimbo is close to acquiring US assets belonging to Canada’s Weston Foods for upwards of $2bn, say people away from the transaction. The Mexican bread and confectionary manufacturer – whose Bimbo Bakeries USA subsidiary already distributes Weston Foods brands in the western US – is understood to be seeking to acquire the eastern distribution assets of the same brands. These include Thomas, Entenmann’s and Boboli. Bimbo, which is present in 12 LatAm countries, is heard looking to raise funds in the LatAm loan market for the deal, and has already tapped a group of banks. A size of roughly $2bn in multiple tranches is being talked about for the financing by bankers not on it. Among those rumored to be involved are BBVA, Citi, ING and Santander. Loans experts say it will probably be a club that is syndicated later on, given very tough market conditions. For advice on the acquisition, Bimbo is heard to have hired New York-based Atlas Advisors, an M&A boutique that earlier this year advised Grupo Kuo in its sale of an asset to Mexichem. At the end of September, Grupo Bimbo’s consolidated holdco debt stood at $1bn, according to S&P which rates the company BBB+ with total debt to Ebitda of 1.1x. Bimbo finance officials did not return repeated calls seeking comment and a spokesman declines to comment on specifics of the transaction. Atlas and the banks rumored to be lending to the company also decline to comment. Brazil’s Magnesita recently agreed to acquire Germany’s LWB and M&A specialists say high grade LatAm firms will continue to seek targets ex-region, despite the credit crunch.
Yearly Archives: 2008
Bank of Jamaica Raises CD Rates
In an attempt to stabilize the local currency, the Bank of Jamaica says it has increased interest rates for certificates of deposits. Rates for CDs with 30-day tenors increased to 17.00% from 14.65%, 60-day CDs to 17.50% from 14.85%, 90-day to 20.00% from 15.05%, 120-day to 20.20% from 15.15%, 180-day to 21.50% from 15.35% and 365-day to 24.00% from 16.70%. The BoJ says a sharp rise in the yields on bonds issued by the local government and Jamaican companies has increased demand for foreign exchange by securities dealers to meet margin calls from overseas creditors, to which the BoJ responded by providing dollars as needed. “This has triggered a disorderly depreciation in the exchange rate, which if allowed to persist, will only precipitate higher inflation and greater macroeconomic instability,” says the bank. It also notes that domestic financial institutions hold significant amounts of its securities that are due to mature over the next three weeks and the resulting increased JMD liquidity could add further pressure on the exchange rate. JPMorgan notes that the relatively low level of FX reserves – $1.7bn-$1.8bn – prompts the BoJ to use rates rather than direct FX intervention to contain currency pressure. “The latest rate hike should help stabilize the Jamaican dollar in the coming weeks, which should also benefit from seasonal FX inflows (remittances) and lower FX demand from a falling oil import bill,” JPM notes. On December 2, the JMD closed at 78.00 per dollar. So far this year, the JMD has reached a low of 68.80 and a high of 80.00 per USD.
Mexico’s International Reserves Rise
Banxico says that as of November 28, Mexico’s international reserves are up by $5.4bn compared to the end of 2007, at $83.4bn. Between November 24 and 28 alone, reserves increased by $2.4bn, driven by $1.2bn in currency sales, Pemex’s $600m in currency sales to Banxico and other operations worth $585m.
Cosan Wraps Up Promissory Notes
Brazil’s Cosan has completed a sale of BRL1.1bn in 1-year promissory notes at DI plus 3%. Proceeds will help fund the acquisition of Esso fuel distribution and service station assets it bought in April from ExxonMobil for $1bn. Bradesco is managing the sale. The sugar and ethanol producer announced Monday the completion of the Esso asset acquisition following the payment of $715m to ExxonMobil and the assumption of debt of $175m.
BNDES Extends BRL900m to EDB
BNDES has approved a 5-year BRL900m credit line for Energias do Brasil to help fund the energy provider’s BRL4.6bn 2008-2012 investment plan, it says. The lines will go to two of EDB’s distribution facilities, Bandeirante Energia and Espirito Santo Eletricas and power generator Energest to help fund generation projects. Funds drawn will have a maximum of 10 years in tenor and pay interest at the TJLP rate plus an undisclosed spread based on EDB’s credit profile. EDB is a subsidiary of Portugal’s Energias do Portugal.
CAF Shells Out $660m in Credits
CAF has approved $660m in loans and credits to three separate borrowers. It agreed to lend $300m to Colombia’s Bancoldex, to help it support SMEs. The Andean development bank also plans to extend a $210m credit line to Panama’s Banconal. Finally, it will lend $150m to Uruguay’s UTE electricity generation and transmission administrator, to support a 3-year program to strengthen the country’s electrical system.
Sofisa Targets 6% of Float in Buyback
Brazil’s Banco Sofisa plans to buy back up to 2.25m, or 6%, of its outstanding shares over a period of 1 year. The move comes as it wraps up a 1.5-month repurchase program in which it repurchased 1.5m units. The bank’s shares closed Tuesday at BRL3.70.
Aracruz Gets More Time to Restructure
Brazilian paper and pulp producer Aracruz Celulose has postponed until December 11 the date for concluding negotiations to restructure its debt. At the start of November, Aracruz reached an agreement with banks to unwind 97% of its negative currency derivative positions. It was planning to reach a debt restructuring agreement with banks by November 30. Currency fluctuations in October devastated the company’s positions, costing it ratings downgrades and a potential tie-up with Votorantim Celulose e Papel. Other LatAm corporates were also whacked by the sharp rise in the dollar.
Brazil Seen Facing Recession
Brazil, the presumed bedrock of LatAm’s economy, is in danger of sliding into negative quarter-on-quarter growth, according to analysts. “Brazil may soon fall in technical recession,” warns Marcelo Carvalho, Morgan Stanley’s executive director of research. Driving the coming recession, he says, are exposure to a global slowdown, a drop in local consumption growth, which may slow from 6% in 2008 to around 3% in 2009; a continued drop in commodities, which he expects to be sharply lower in 2009; a slowdown in domestic credit expansion, a decline in local companies’ Ebitda gains from annual averages of 20% to low single digits in 2009, car sales which may have dropped 20% in November alone and a deterioration in business confidence. Carvalho also explains that GDP growth in Q4 2008 and Q1 2009 look to be very weak and possibly negative in comparison with previous quarters. Real GDP growth in Brazil is expected to decline from an annual average of 3.8% between 2003-2007 to 2.0% in 2009, according to the shop. Barclays Capital also sees a larger than expected deceleration in the Brazilian economy and forecasts GDP to grow only 2.2%, but warns that this could be revised downward. The shop also believes that to try and contain the deceleration, the central bank will begin cutting rates earlier than Q4 2009, which was the consensus. UNCTAD’s latest world economic outlook – released this week – has Brazil expanding by as little as 0.5% next year in its pessimistic scenario, versus 5.1% in 2008.
Veracruz Eyes Repeat Vehicle Securitization
The Mexican state of Veracruz is preparing to sell MXP1.5bn in bonds backed by vehicle ownership tax revenue, using the same structure as a 2006 vehicle tax securitization. Veracruz aims to split the issue into equal MXP and UDI-denominated tranches due 2036. A banker on the deal says it could come this month, but the issuer awaits opportune market conditions. Banorte and Value are managing the transaction, rated AA/AA+ on a national scale. Veracruz last securitized vehicle registration taxes in December 2006, placing MXP3.76bn in 2036 UDI-denominated bonds at 5.32% and MXP1.11bn in MXP-denominated 2036 notes at TIIE plus 95bp.