A ruling in a London a court that overturned a decision to freeze PDVSA assets gives the oil giant a short term boost, according to Fitch. On Tuesday, a UK court announced it had overturned a previous decision to bar PDVSA’s access to assets formerly belonging to Exxon. “This is certainly good news for PDVSA,” Gianna Bern, senior director of LatAm corporate finance at Fitch, tells LatinFinance. “This returns the company to the financial flexibility it previously had,” Bern notes. PDVSA’s operations should remain unaffected after the ruling, she adds. “For the most part, as we understand it, it is business as usual at PDVSA and throughout the freeze, there was minimal impact to its daily operations.” Still, the oil giant’s legal problems are far from over. Investors can expect more ongoing volatility related to PDVSA as the legal disputes between the company and its former partner are likely to remain for years going forward.
Yearly Archives: 2008
Credit Suisse ECM Head Jumps to Merrill
Merrill Lynch has poached Sebastien Chatel from Credit Suisse, where he was head of LatAm ECM. He joins the US shop – which is on a hiring spree in Brazil – in a co-head position and regroups with former UBS colleagues who recently jumped ship to Merrill, including Alexandre Bettamio, former investment banking co-head at UBS Pactual. Chatel is named co-head of LatAm ECM, presumably sharing the beat with Juan Vogeler, Merrill’s LatAm ECM chief. Bettamio, along with three other senior UBS Pactual bankers, jumped ship to Merrill earlier this week, a move which struck local bankers as curious given the bank’s woes in the US. But late yesterday, Merrill officially announced the moves, which include five other mid and junior-level bankers, saying the hires are part of a push by the firm to increase its footprint in high growth economies. Chatel, who left UBS in 2006 for Credit Suisse, led the latter’s ECM business to the top of the league tables. The two Swiss shops dominate the Brazilian equity market and originated the vast majority of the region’s IPOs and follow-ons last year. Merrill participated in a handful of equity deals, but did not come close to pulling in the mountain of fees bagged by UBS and CS. However, given the poor LatAm ECM outlook for 2008, that fee pool looks hugely eroded.
Interbank Restructures, Flexes New Loan
Peru’s Interbank has restructured and increased the margin on a $200m 3-year loan. The deal, launched in early March as a working capital 3-year step up, has now been broken into two parts: a $100m trade facility at 80bp, 85bp and 95bp over Libor in years one, two and three, and a $100m working capital facility at 100bp, 110bp and 120bp over Libor, according to a banker close to the process. Participants can expect fees of 35bp plus an additional 5bp for early commitments, adds a banker away from the deal. Originally, pricing for the entire facility, made up entirely of working capital, was 80bp, 85bp and 95bp over Libor. But that apparently did not go over well with market participants and was subsequently changed to reflect the current pricing. This is the fourth time a LatAm bank has flexed up pricing on a loan this year. Others, such as Peru’s BCP and Brazil’s BicBanco and Unibanco also had to adjust margins as expectations changed. Standard Chartered, which has taken a particular focus on financial institutions this year, has had a leading role on all those deals including Interbank, for which it is sole bookrunner.
Cresud Raises $288m in Rights Offering
Cresud, the Argentine holding company for IRSA and a number of agricultural assets in Brazil and the Southern Cone, completed a rights offering with existing investors Tuesday that grossed it $288m through the sale of 180m shares. The deal saw strong demand from existing shareholders, which meant new investors could not participate in the offering, Alejandro Elsztain, CEO, tells LatinFinance. Of the total shares offered, 60% were distributed in the form of ADS at $16, while the remainder was sold in the form of locally listed stock, at ARP5.04. Both the ADS, which represents 10 local shares, and each local share also carry a warrant that permits holders to buy an additional share at a 5% premium. “People are very interested in our track record with commodities. There are a lot of funds talking about investing in agriculture and commodities now, but we have the experience to show for it,” says Elsztain. The CEO says the proceeds are being used push into new markets, including Bolivia, Paraguay and Urugay. Cresud, which owns a 24% stake in Cactus Argentina, a feedlot whose co-investors include Tyson Foods, says Elsztain. That business is also set to grow and might draw some of proceeds he says. Citi, Deutsche and Raymond James led the offering.
BMG to Issue BRL500m in ABS
Brazilian mid-size bank Banco BMG plans to sell up to BRL500m in shares in a receivables investment fund. A 4-year tranche of up to BRL415m in senior shares will pay 108% of the DI rate. The rate for a 4-year subordinated tranche of up to BRL85m has not yet been set. The shares will be issued by the BMG FIDC VII fund and backed by the cash flow from repayment of personal loans by BMG to government employees and non-public service pensioners, according to Moody’s. Proceeds will be used to grow BMG’s loan portfolio. Moody’s gave the deal a preliminary Aaa.br global local currency rating. BMG, which specializes in payroll credit, raised $250m in a two-year bond sale earlier this month.
Brazil Structured Faces Tough Year
Structured finance and securitization in Brazil are in for a trying 2008 after a decline last year, according to delegates at the LatinFinance Brazilian Structured Finance and Securitization seminar Tuesday in Sao Paulo. An issuance level close to last year’s would be a good result, but delegates predict another fall. “This year will be very challenging,” says Jayme Bartling, senior director of structured finance at Fitch. Total Brazil securitization volume was $3.1bn in 2007, down from $5.3bn in 2006, according to Fitch. This year’s issuance is set to come from FIDCs, CRIs, MBS, securitization of personal loans, auto loans and trade receivables. There may also be some NPL activity and agricultural asset structures. And further tranching of transactions is anticipated to provide different investors what they need. However, the market is constrained by an unsophisticated investor base, regulation, lack of government sponsorship and no standardization. Despite the financing opportunity that presents itself from shuttered bond and equity markets, bankers are cautious on the outlook. “It will be a tough year,” says Brigitte Posch, managing director at Deutsche Bank. Unsophisticated local investors are losing out to overseas markets, where the buyside is willing to do the credit work to take lower rated exposure, she adds. However, Uqbar partner Chuck Spragins is a contrarian bull on the asset class, predicting significant growth for Brazil in 2008. He adds that demand for structured product from the country far outweighs supply, though he concedes there are problems with transparency and information flow.
Brazilian Locals Turning Defensive
Persistent hostile global conditions – despite a Fed rate cut Tuesday and US equity rally – as well as lingering uncertainty about how bad the external financial crisis will get, are rattling Brazilian investors. Some are heard shifting into debt and structured products from more volatile equity, while others are stockpiling cash or liquid short term instruments like CDs. A diminishing handful remains convinced that Brazil will not be severely impacted by the rout – a long shot as the US woes start to spread and Fed action appears to offer only a short term relief. However, the silver lining of the external jolt may be the opportunity for Brazil to prove its fundamental strength, which has long been talked about but not yet tested. “We see it as a good opportunity for Brazil to clean up, for development, for regulation,” Paulo Werneck, executive director of investment at Icatu-Hartford tells LatinFinance. “We are learning by the other guys’ mistakes.” Werneck adds that there is still demand for Brazilian assets, but that the fund has shifted to a more defensive stance, buying the dips. Icatu-Hartford manages BRL5bn.
Chilean Mall Operator Sells Bonds
Chile’s Parque Arauco has issued CLP69.27bn ($158m) in bonds denominated in UF, the local inflation-linked unit. The shopping mall developer and operator placed CLP24.74bn in 2018 with a 3.7% coupon at 103.82 to yield 2.97%. It also priced CLP44.53bn in 2029 bonds with a coupon of 4.30% at 105.79 to yield 3.79%. Demand for the issue reached CLP72.94bn. The bonds are backed by a mortgage on Arauco’s flagship Terrenas Parque Arauco mall in Santiago. Proceeds will be used to finance the company’s $1bn 2007-2009 investment plan, and refinance existing debt. Arauco operates shopping malls in Chile, Argentina and Peru.
GMAC Mulls Mexico Issue
Frequent peso issuer GMAC is considering returning to the Mexican market. “Right now we’re just having conversations,” a GMAC official tells LatinFinance. He adds that Mexican pricing has only flared by around 15bp in the recent credit turmoil, making that market still attractive for long term fund raising.
Morgan Beefs up LatAm Equities
Morgan Stanley has poached Alexandre Falcao, a Sao Paulo-based equities analyst, from Merrill Lynch. Falcao will continue to cover small-caps as he did at Merrill, focusing on the food, healthcare and education sectors, among others. Dario Lizzano, head of the LatAm equities business at Morgan Stanley, tells LatinFinance the move is part of a broad push into the region with an emphasis on building up a local presence. Lizzano says he plans to hire up to three more analysts to be based in Mexico and Sao Paulo in the coming months. Currently, half of the bank’s team is based in Sao Paulo while the other half is in New York. Morgan Stanley has also in the past few months hired two traders in Brazil and four LatAm salespeople – three of whom are in New York and one who is based in London.