Mexico’s central bank held interest rates steady at 7.5% for the sixth straight month, on concerns about increasing inflation and knock-on effects from the US slowdown. “On one hand, inflation pressures continue to increase in the world and in Mexico, despite the fact that Mexico has seen less inflation than many other countries,” Banxico says in a statement. “On the other hand, the risks to our country’s economy have increased considerably.” Banxico says food and commodities prices were rising so fast that it will have to revise the inflation forecast in its next inflation report April 30. “The tone of the statement and the actual policy decision lead us to believe that the upward revisions to the inflation forecasts will be modest and that they will only cover a relatively short period,” says Alonso Cervera, economist at Credit Suisse, in a report. “Otherwise, we think the central bank would have already tightened or would have issued a more hawkish communiqué.”
Yearly Archives: 2008
Brascan Gets MB, Plots Buyback
Brascan Residential Properties has completed the acquisition of Brazil’s MB Engenharia for at least BRL164m. The real estate company controlled by Canada’s Brookfield Asset Management will pay BRL24m cash to MB shareholders, and at least another BRL140m in 2011, depending on cash flow generation. Brascan aims to tap housing markets in MB’s stronghold in the country’s center-west region. Banco Brascan advised Brascan on the transaction, and Credit Suisse and Unibanco advised MB. Separately, Brascan’s board approved a buy back of up to 7.4m of its shares, authorizing up to BRL110m for the operation.
Small Deals Exposed to Investor Pushback
On Wednesday, Les Lis Blanc, a clothing retailer, is set to bring its IPO via Merrill and Morgan Stanley. The 26m share offering seeks a price in the BRL10.50-BRL12.50 range. At the midpoint, it would result in a BRL300m offering – a risky size given investors’ distaste for small illiquid deals. Also on Wednesday, Copasa seeks a follow-on of 16m secondary shares via Banco do Brasil and Citi. Copasa closed at BRL24.80 Friday versus the BRL31.58 it closed at prior to the deal’s announcement in November. And Thursday, Gerdau is set to bring a jumbo $2bn follow-on offering of ADS and Bovespa shares via Itau BBA and JPMorgan. Of all the deals out there, Gerdau is most likely to attract interest because of its size, sector and the company’s performance in general.
Brazil Equity Issuers Brave Hostile Markets
The somewhat disappointing IPO of Brazil’s Hypermarcas last week bodes ill for the four issuers hoping to bring deals this week, particularly the smaller deals. The consumer goods company closed Friday down 1.7% at BRL16.70, versus pricing at BRL17.00. On Friday, the Bovespa rose 0.6%. The IPO, priced late Wednesday, involved the sale of 35.8m shares, which raised the company BRL608m. Hypermarcas went out with an initial range of BRL20.50-BRL24.50 through Citi and Merrill Lynch, but had to cut it to BRL17.00-BRL21.00 because of pushback from investors. One buysider says he was encouraged by the fact that it got done at all. But it is unclear how investors will react to others teed up for this week. Anhanguera Educacional, an education company is targeting a follow-on of 17m shares to boost liquidity and replenish coffers for capex and acquisitions. The stock closed Friday’s session at BRL26.00, flat to the previous session and 44% above its March 2007 IPO, which came at BRL18.00 Credit Suisse, Merrill and Santander are leading.
El Venezolano III Expected Next Week
Venezuela’s $1.8bn bond offering is expected to launch next week, according to Caracas newspaper El Universal. The government has stated it expects a sale to take place this month, directed at companies that import food, medicine and machinery. It is expected to be similar to the previous El Venezolano issues. The government sold $2bn in the Venezolano I and II in November, which combined dollar and local-denominated debt in a sale designed to allow access to dollars and reduce pressure on exchange rates.
EM Debt Funds Continue to Attract Cash
The latest mutual fund investor data for the week ended 16 April reveals a net flow of $258m (0.37% AUM) into EM debt funds, says ING, which sources JPMorgan and EPFR Global. “Net investor buying was seen across fund types with hard currency funds witness to their first positive flow of $35m (0.09% AUM) since mid-January,” says ING. Local funds meanwhile raked in $85m (0.44% AUM) versus $242m last week. Meanwhile, blended funds got $138m (1.03% AUM) in new money. “However, crossover HY vehicles, which also invest in EM, saw redemptions rise from $195m to $357m (0.21% AUM),” says EPFR.
Reebok buys Brazil’s Vulcabras Comercial
American apparel maker Reebok International Limited has acquired 99.99% of Sao Paulo based Vulcabras Comercial, a manufacturer, distributor and retailer of sporting goods from Brazilian shoe maker Vulcabras. Pricing was not disclosed. With the purchase, Reebok gains a platform to distribute its products and increase its presence in Brazil and Paraguay, according to American law firm Latham & Watkins, which advised Reebok.
Sidor Establishes Transition Committee
A transition committee has been established to oversee Sidor’s operations during the discussion of terms for the nationalization of the Venezuelan steel maker, which started Thursday, according to the Venezuelan state news agency. The committee includes representatives of the government, the union and Sidor’s class B shareholders. It will act in coordination with the board of directors while the nationalization proceedings take place. Venezuelan mining minister Rodolfo Sanz will chair the committee.
Lloyd’s Enters Brazil
Lloyd’s of London has opened a representative office in Rio de Janeiro following regulatory approval, becoming what it says will be the first reinsurer in Brazil. As a locally registered company, Lloyd’s will have access to about 40% percent of the country’s market, up from 10% percent for insurers that do not have offices in Brazil.
BicBanco Raises $130m
Brazilian mid-sized bank BicBanco has priced $130m in 2010 dollar-denominated bonds at par with a coupon of 7%. Demand reached $150m, according to a bank official, but the deal was held at $130m to maintain the 7% yield. Demand came almost entirely from US and European buyers, with very small number of Asian buyers. Proceeds will fund the bank’s working capital. Banco do Brasil and Banco Votorantim managed the sale. BicBanco, rated BB-/Ba1, went on a roadshow via UBS in January, but put off a deal due to market volatility. Fellow mid-size Brazilian Banco Fibra priced $150m in 2-year notes Fibra at 99.534 with a 6.750% coupon to yield 7.000% last week. Banco Cruzeiro do Sul is set to launch a similar transaction as soon as next week.