Brazil’s BNDES state development bank has set terms on its involvement in the financing of the Jirau hydroelectric project. Pricing on the up to 25-year loan will be TJLP plus a spread of 46bp-254bp, plus a BNDES financing spread of 50bp. The TJLP was at 6.25% yesterday. The bank will limit its total indirect and direct participation to 75% of the project’s total cost. The 3.3GW project on the Rio Madeira in Rondonia will go out to bid May 12 and was expected to cost more than BRL9bn. The government has said bidders will have to sell most of the electric power from the project at a maximum of BRL91 per MWh. CPFL and Cemig have declared their intentions to bid. In October, an Odebrecht-led consortium won an auction for the sister Santo Antonio hydroelectric project, offering BRL78.87 per MWh.
Yearly Archives: 2008
Metrofinanciera Says Places First MXP RMBS
Mexico’s Metrofinanciera has priced MXP750m in 2038 RMBS at TIIE plus 250bp. The deal marks its first collateral-based bond done in pesos rather than the UDI inflation-linked unit, says an executive close to the deal. A pool of more than 2,500 of Metrofinanciera’s own mortgages backs the bonds. They also feature a partial guarantee from SHF. Deutsche Bank managed the sale, rated mxAAA. The Sofol is also heard preparing an UDI-denominated construction loan securitization.
Vene Adds $1bn to USD Bond Sale
Venezuela has sold $4bn in dollar bonds to domestic investors, up from a planned $3bn after getting $9.29bn in orders. The sovereign added $500m each to the 9.00% of 2023 and 9.25% of 2028 tranches, which priced last week at 115% of face value. The government sold dollar-denominated assets to locals as part of its continuing effort to meet demand for foreign currency and strengthen the VEB in the black market. Only Venezuelan individuals or entities could participate in the sale, aimed mainly at companies in the food, medicine and capital goods sectors. Despite hefty oversubscription, the government said it filled 100% of the minimum orders – $4,000 for companies and $500 for individuals – while allocating partial amounts for larger orders. Barclays and Deutsche Bank managed the sale.
Gerdau to Unveil $500m Syndication
Brazilian steelmaker Gerdau will tomorrow launch a $500m syndicated loan, marking its fourth visit to the markets in just eight months. The 3-year facility is heard paying Libor plus 125bp, and is led by Citi. The transaction will be presented to potential participants at a lunch meeting Wednesday in New York. “The only issue I can see with [the new loan] is that people are already holding a lot of Gerdau,” said one syndications banker away from the deal, adding he believes the price should clear the market. The company’s seemingly endless appetite for acquisitions and financing has brought Gerdau to every market available since last summer. In August, Gerdau launched a $2.75bn syndication with 5 and 6-year trade pieces at 100bp and 125bp, and a 5-year working capital piece at Libor plus 125bp. HSBC, ABN and JPMorgan were the leads. In October, the company sold a $1bn 2017 bond at 99.128 to yield 7.375%, through the same bank group. And last week, the company raised $2.4bn in a multi-tranche stock follow-on – its first equity deal in 13 years – via Itau BBA.
Parque Arauco Bags UF Loan
Chile’s Parque Arauco has secured a 7-year $110m-equivalant syndicated loan denominated in the UF inflation-linked unit. The UF2.5m facility features a 2.5-year grace period and pays interest at UF plus 2.81%. The developer and operator of shopping malls plans to use proceeds to help finance the 2008 portion of its $1bn 2007-2009 development plan. Banco de Chile, Banco BCI, BBVA and BancoEstado are providing the financing. Arauco sold $160m in local UF-denominated bonds backed by a mortgage on its flagship property last month, also to finance its investment plan.
Banco del Sur Reportedly Taking Shape
If the governments of the participating countries approve terms, Banco del Sur will start operations this year with $7bn in subscribed capital and $20bn of authorized capital, according to wire reports Friday. The news emerged after economy ministry officials from Brazil, Ecuador, Paraguay, Uruguay, Bolivia and Venezuela met in Montevideo. According to reports, Argentina, Brazil and Venezuela will each make a capital contribution $2bn, Ecuador and Uruguay $400m and Paraguay and Bolivia $100m. The proposal will be consulted with Argentina, which had no representation at the meeting after the resignation of the country’s economy minister. The new multilateral will be headquartered in Caracas, with offices in Buenos Aires and La Paz.
Moody’s Mulls Cosan Downgrade
Moody’s has placed the Ba2 foreign currency senior unsecured rating of Cosan on review for possible downgrade, affecting approximately $886m in debt. The action was prompted by the announcement that Cosan has signed a share purchase agreement with ExxonMobil to purchase its fuel distribution and lubes assets in Brazil at a price of $826m, in addition to the assumption of $163m in net debt and net related-party receivables of $35m, the agency says. “While the acquisition of such assets should benefit Cosan’s credit profile by diversifying its operating activities providing it with a more integrated platform and reducing the volatility of its cash flows, this transaction will lower Cosan’s overall operating margins and depending on how the transaction is financed, total leverage as measured by debt to Ebitda could increase,” Moody’s says.
S&P Considers Argentina Downgrade
S&P has revised to negative from stable the outlook on Argentina’s B+ rating after economy minister Martin Lousteau resigned last week. “The negative outlook reflects the government’s rejection of policies to correct the country’s overheating economy,” says the agency. S&P analyst Sebastian Briozzo says the current policy mix increases the likelihood that inflation continues to accelerate, which will fray social cohesion and could lead to additional direct governmental intervention. Inflation expectations are 32% for the next 12 months. “Wage pressures, subsidies, and the continued dispute with the agricultural sector will challenge fiscal policy over the next 18-24 months,” says Briozzo. “Any reversal of the favorable terms of trade that Argentina has enjoyed for five years would hurt the fiscal outturn and lower the projected 2.8% of GDP current account surplus for 2008,” he adds. S&P warns of downside risk to the ratings as rising inflation expectations and distortions in the economy through price controls, subsidies, and regulation hurt growth prospects. This in turn may dent government popularity. “Any material fiscal deterioration that ensues as a result could lead to a lowering of the ratings on Argentina. Conversely, if President Cristina Fernandez’s new government adjusts the policy mix to redress the overheated economy, the outlook would revert to stable,” says Briozzo.
Arg EconMin Turnover Rattles Markets
The revolving door at Argentina’s economy ministry is unsettling investors and choppy times lie ahead. “The initial reaction has been negative because there’s uncertainty now about the dynamics of the economy,” says Carola Sandy, analyst at Credit Suisse. “The sudden departure [of Martin Lousteau] was not good news for the market,” she adds. Lousteau was replaced by Carlos Fernandez – an unexpected choice – who is left to tackle inflation and the farming conflict. There was a mild selloff Friday, exacerbated by a negative watch from S&P. Eduardo Levy-Yeyati, head of LatAm research at Barclays notes FX weakness until the central bank intervened. “Pressure on the exchange rate should recede in the next weeks,” Levy-Yeyati says. Credit, however, is another issue. “The situation with credit is simply illustrated by looking at the CDS 5-years, which now imply approximately a 35% probability of default within the next 5 years, much higher than what the country’s capacity would justify,” the analyst adds. Before his appointment, Fernandez was the head of Argentina’s tax collector AFIP, according to Argentina’s state news agency. He is politically close to former President Nestor Kirchner and a supporter of economic policies currently in place, says Goldman Sachs. “The appointment . . . signals that, despite higher inflation, the government is not ready to introduce any changes to the current economic policies,” says the shop.
EM Debt Funds Continue to Draw Cash
The most recent mutual fund investor data for the week ended 23 April revealed a net flow of $264m (0.37% AUM) into EM debt funds, says ING, which cites EPFR Global and JPMorgan data. This was similar to the previous week and boosted by continued interest in local currency. “Deeper detail shows the net outflows of $11m from hard currency funds were more than offset by the $212m (1.09% AUM) purchases of local currency funds and $63m (0.45% AUM) inflows for blended funds,” says ING. Dedicated HY funds meanwhile took in $401m (0.48% AUM), almost three times the previous week, extending a positive run. However, crossover HY vehicles, which also invest in EM, experienced redemptions of $403m (0.24% AUM) versus $357m last week, says ING. EM debt funds lost 0.32% in the week ending April 24, according to Lipper. International income funds sank 1.33%, the biggest drop of the week, while global income funds dropped 0.63%. High yield funds were the biggest gainers with 1.08%, Lipper reports.