Uruguay’s Union Agriculture Group postponed a $200m-plus IPO scheduled to price Tuesday night, according to bankers on the deal, with more news about the timing expected today. If the deal is sidelined, it will become the latest in a string of LatAm issues that have been pulled and follows a jettisoned effort last week from Brazilian sugar cooperative Copersucar. Union had been aiming to sell 14.3m shares at $13-$15, plus a possible 15% greenshoe, and become the first IPO from Uruguay since 2006. Union, which acquires underutilized farmland in Uruguay and develops it for resale, was seeking funds for land acquisitions, and possibly for debt repayment and working capital. Credit Suisse and JPMorgan were the leads.
Yearly Archives: 2011
Posted inDaily Brief
Uruguay, Peru file SEC Shelves
Both Uruguay and Peru have filed SEC selves to issue up to $5.56bn in debt between them amid expectations that both sovereigns are likely to favor local-currency trades when they do decide to tap the markets. Peru’s filing to issue of up to $5bn in new debt securities comes some eight months after the Andean country sold $2.5bn in dollar and sol-denominated bonds and after the election victory of left-leaning presidential candidate Ollanta Humala sent bonds and stocks reeling. More recently, however, Peru has seen a relief rally following Humala’s market friendly appointments at the Central Bank and the Ministry of Finance. According to the filing, proceeds are slated for general purposes including financial investments, refinancing, or the retirement of local and external debt. Meanwhile, Uruguay’s move to file an up to $560m debt shelf, as well as an upgrade to BB+ this week by S&P, have raised speculation that the sovereign could try a liability management trade to retire more US dollar debt or simply take a stab at retapping its existing inflation-linked notes. This falls in line with the government’s strategy of de-dollarizing its debt, something that the ratings agencies have also cited as a positive. A reopening of existing UI bonds, currently trading in the 3-4% range, could come at a nice 25bp new issue premium over current trading levels, notes an EM portfolio manager who holds Uruguayan bonds. “There will be lots of interest for local Uruguayan notes,” he adds. Currently, the sovereign has three outstanding UI bonds, its 2018s, 2027s and 2037s. Just yesterday S&P upgraded Uruguay’s sovereign rating to BB+, bringing it in line with Moody’s and Fitch and putting it just below investment grade. Uruguay last came to market in May when it issued JPY40,000 ($493m) in 2021 Samurai notes to yield 1.64%, but it hasn’t been in the broader market since late 2009. Meanwhile, the sovereign has played down any talk of issuance. “The augmentation of the shelf was done b
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Venezuela’s Jumbo 20-Yr Fails to Surprise
The announcement Tuesday that Venezuela plans to issue $4.2bn in RegS only 11.95% 2031s hardly came as a surprise after rumors of such a deal had already sent secondary levels south. Indeed, many of the details circulated over the last week proved to be true, with the only slight exceptions such as talk of a 12% coupon. As is standard practice for such deals, the sovereign has set the price beforehand, in this case par, and will leave the books open to allow locals to buy at an FX rate of VEB4.30/1USD. Grey market levels of 81.50-82.50 were already being quoted yesterday as foreign accounts calculated what would be fair value on the bonds once they were free to trade in the international market after a 42 day seasoning period. At 82.50, the amortizer would offer a yield of around 14.37%, according to one investor. “All this will be sold through the Sitme (the state-run FX platform) at VEB5.30/1USD, which implies a slightly lower secondary price [than 81.50-82.50],” says RBS strategist Siobhan Morden. “Irrespective it is cheap versus the curve.” For instance, Venezuelan benchmark 2027s were trading Tuesday afternoon at 74.25, or at a lower 13.125%-13.05% yield, even after selling off in the wake of supply fears. With a $4.2bn size, the new 2031s will become a new benchmark for investors and will provide an attractive instrument to take a view on regime change as the 2012 presidential elections approached, Morden adds. If nothing else the11.95% coupon offers alluring carry. Indeed the deal is expected to go well. As one London-based investor points out, appetite for Venezuela debt remains robust in the context of new inflows to EM bond funds and the resilience of high yield EM debt. The B2/BB-/B plus bond is governed by New York law and will be registered in Luxembourg. The RegS bond will amortize equally on August 5, 2029, 2030, and 2031. Deutsche Bank was mandated as lead, but perhaps more interestingly the government has also selected Russia’s Evorfinance Mosnarban
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ABC Din Rumored Canceling Offering
Chilean investment bank LarrainVial confirms it is working on the preliminary stages of an IPO for retailer ABC Din, but declines to confirm talk that the company has decided to halt the deal. This comes in the in the wake of local market volatility caused by the recent implosion of fellow retailer La Polar under allegations of unauthorized practices in the management of its credit portfolio. ABC was reported to have been considering a sale of 25% of the company.
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LatAm Corporates Reduce Refinancing Risk
Liquidity and refinancing risk for Latin America corporates continues to improve thanks to stronger balance sheets, support from governments and development banks and stronger appetite for EM assets, according to a recent Moody’s report. Of the universe of Latin American companies covered by the ratings agency, 27%present a high refinancing risk, down from the 30% seen in April 2010 and a considerable drop from the 55% registered at the height of the financial crisis in March 2009, it said. This is partly due to corporates’ efforts to refinance debt and extend maturities at a time when investor appetite for EM corporates has grown. With the European and US debt crises threatening to derail markets at a moment’s notice, Moody’s says: “Prudent liquidity management with timely refinancing will continue to be a critical consideration for ratings in the region.” LatAm non-financial corporates face come $37bn in debt maturities during 2012 and another $43bn in 2013, though those amounts will increase as short-term debt due in 2011 will be rolled over into 2012 and 2013. Of the $142bn in debt maturing between 2011-2013, about $102bn comes from investment-grade issuers. Broken down by sector, the oil and gas industry faces the highest amount of debt maturities over this period ($33bn), followed by utilities ($26bn), metals and mining ($18bn), telecommunications ($18bn) and food ($13bn), the agency says.
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M&G Hits the Road
M&G Finance, a petrochemical company with operations in LatAm, kicked off roadshows yesterday to market a $500m 7NC4 dollar bond. The 144A/RegS deal was shown to investors on Monday in New Jersey and is scheduled to move to New York, Boston, San Francisco, and Los Angeles through Thursday before wrapping up in London next Monday. The Italian-based company with a LatAm presence is a producer of polyethylene terephthalate (PET) resin for packaging applications. Bond proceeds are expected to address capex, debt repayment, liquidity and working capital. The bond is expected to get a B3/BB rating from Moody’s and Fitch. Given its presence in developing countries, the deal is being sold off both high-yield and EM desks. JPMorgan is the sole lead on the transaction.
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Petrobras Seen Tapping Opportunistically
Brazilian oil giant Petrobras is targeting $67.0bn-$91.4bn in financing needs through 2015 as part of a $224.7bn investment plan over the next four years, while also seeking to divest up to $13.6bn in assets. Capex will be covered partly through cash on hand and the rest through new debt rather than equity. And while many bankers have their doubts that the Brazilian oil giant will try its chances in the international bond markets again this year after selling a whopping $6bn in new 5, 10 and 30-year bonds in January, others don’t discount the possibility. “To say that they are 100% unequivocally done, that is not the indication I understand they gave to the market. They will be opportunistic, but they are not going to go to the market when it is shaky. They will time it right,” says one DCM banker. Such opportunities still exist despite broader uncertainties as illustrated by last week’s well-timed 30-year debut from Brazilian petrochemical concern Braskem, which is indirectly held by Petrobras and came at a 5-10bp new issue premium partly thanks to the capped $500m size, the banker adds. With Petrobras typically looking to issue in size, it would likely have to offer a more generous premium of anywhere between 15-25bp to retap its outstanding debt, say investors, analysts and bankers. That would translate into a 4.48%-4.95% yield on a reopening of the 5.375% 2021s which have been trading around the 4.70% mark, though some investors see a new 10-year coming as tight as 4.75% under current conditions. As for a reopening of the 6.75% 2041s, some accounts see a 6.25% finish as reasonable. Substantial needs mean that Petrobras has long been looking to diversify its funding sources and relieve pressure from its core dollar market. But a euro or sterling trade may not be suitable against what remains an unsteady backdrop in Europe, though investors on both sides of the Atlantic are receptive to the credit. “When markets stabilize, Petrobras has that appeal and is viewed v
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S&P Gives IG To Uruguay External Issues
S&P raised Uruguay’s foreign and local currency ratings Monday to BB+ from BB, but also moved its foreign currency issue rating to BBB minus from BB+, meaning that external debt issues will now carry an investment-grade rating. The investment-grade reflects high expected recovery rates in the event of default. The agency cites the country’s ability to maintain similar economic policies during different administrations, including efforts to reduce the government’s exposure to foreign currency debt to avoid external shocks. “The upgrade on Uruguay incorporates its growing track record on the implementation of prudent and consistent economic policies,” the agency says.
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Transener Eyes Tuesday Pricing on New 2021
Argentine utility Transener is looking to price a new 2021 as soon as today, as it looks issue new debt as part of a debt exchange and buyback of its existing 2016. Books closed yesterday, and the borrower is offering to pay a nominal annual rate of 9.75% on the up to $148.6m issue of 2021s. Investors can exchange the existing bonds for the new 2021s par for par, and receive an extra $30 for each $1,000 if tenders were submitted by the early bird date of July 25. Alternatively, they can cash in the existing bonds and receive $910 for each $1,000 in principal, plus another $90 in early bird premiums. The company is also seeking consents to amend terms and conditions on the outstanding bonds. The final size of the issue could be higher depending on the success of the liability management operation, but it cannot exceed the $300m ceiling set by the program. The exchange offer expires on August 9. The 2016s were originally issued in 2006 with a $220m size and priced at par to yield 8.875%. Citigroup and Deutsche Bank led that transaction and are also acting as leads on this occasion.
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Unifin to Issue MXP Issue
Mexico’s Unifin Financiera is preparing to issue up to MXP400m ($34m) in the domestic bond market. The 5-year floating rate bonds will pay a spread over TIIE. Pricing is expected at the end of August. Standard & Poor’s and HR Ratings assigned local triple A ratings for Unifin. IXE is leading the transaction.