A January 6 Daily Brief entitled “Baja Mining Seeks Project Financing” incorrectly portrays the timing of the deal. The project financing has already been signed.
Yearly Archives: 2011
Posted inDaily Brief
BAT Says Interested in Protabaco
British American Tobacco (BAT) says it is interested in Colombian cigarette company Protabaco, following Philip Morris’ decision to walk away from a $452m deal. Philip Morris announced Wednesday it would abandon acquisition plans in the face of objections from Colombia’s Superintendencia Financiera. The market regulator’s hackles were raised by the prospect of the 78% market share the combined Philip Morris/Protobaco would command. Colombian equity analysts say BAT would likely face the same objections from the regulator should it try to step into the breach. However, a BAT spokesperson says its market share in Colombia is significantly less than Philip Morris’ and that BAT should not encounter the same problems. BAT had previously expressed interest in the target.
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Interbolsa Entering Mortgages, Car Loans
Colombian financial conglomerate Interbolsa is launching two Bogota-based subsidiaries this year, company president Rodrigo Jaramillo tells LatinFinance. One will be focused on residential mortgage loans while the other focuses on car loans. Jaramillo says Interbolsa is investing $20m in cash on hand in the mortgage loan company, and that Deutsche will take a 15% stake in the subsidiary after one year. “Our objective is to take on a 7% market share in a year,” Jaramillo says. The largest player in the residential mortgage market is Bancolombia, Jaramillo says, with about half of the market. Revenues in the Colombian residential mortgage market grow at about 7%-8% a year, he adds. Meanwhile, Jaramillo says the car loan subsidiary is being created in partnership with local car retailers and will require a smaller investment than the mortgage company. In 2010, about 250,000 cars were sold in Colombia, of which 80% were financed, he says. In fact, local research firm Econometria says that 2010 car sales reached a record high. “We expect to gain 15% market share in the car loan sector in a year,” Jaramillo says.
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Chilean Retail Stocks’ Upside Limited
After a run-up in stock prices and revenues during the second half of 2010, Chilean retailers may not have much upside left, according to Nick Robinson, a director at UK-based Aberdeen Asset Management. Aberdeen owns shares in Chilean retailers Falabella, La Polar and Parque Arauco. “These are actually decent investments over the long term, but they have had quite a high run-up and they are not cheap anymore,” he explains. He estimates that, in general, Chilean retail stocks are currently valued at around 30x earnings, while a fairer valuation would be around 20-25x earnings. Robinson says that retail valuations may fall slightly by the end of the year. Juan Pablo Correa, an analyst who covers retail equities at Chile’s IM Trust, agrees, saying that the Chilean Ipsa index rallied about 40% in 2010, helped in large part by retailers such as Falabella, which at $26.9bn has the highest market cap of the index. A report by Chilean research shop BCI shows that returns for the Ipsa index in the period between November 19, 2010 and the close of the year were -0.03%, while returns on Cencosud’s shares were 7.3%. The report also notes that in the full year 2010, Cencosud’s shares soared 112.2%, Falabella’s gained 75.6% and Ripley’s were up 53.0%. But this does not mean that equity analysts are not recommending any retail stocks. While IM Trust’s Correa is revising his recommendation on Falabella and Ripley, where he believes the companies’ growth has already been factored into their share price, he is recommending Cencosud and La Polar. He explains that these companies’ aggressive expansion plans could bring some upside to their stock. Cencosud’s performance depends on the company being able to achieve synergies with recent acquisitions in Brazil and Peru, he explains, while La Polar’s depends on the company’s success in Colombia and the performance of its credit card operations. BCI analysts, meanwhile, are neutral on Falabella and Ripley and underweight on Cencosud, given
Posted inDaily Brief
Local Mexico DCM Could Stall
Local Mexico DCM issuance may stall in 2011, after considerable volume last year, say bankers. Mexico’s low interest rate environment in 2010 led big issuers to pre-fund for 2011, with Pemex, Televisa, CFE and America Movil all doing sizeable transactions. DCM bankers do not expect much of an increase in issuance volumes for 2011.Views are mixed, with some bankers expecting volumes to remain the same, though one head of DCM says he expects an 18% increase in issuance by corporates. An expectation that the economy will improve in 2011 means companies also expect increased cash flow, and so could be less likely to look to the bond market to meet capital requirements, adds another head of DCM. With a lack of top names expected to come to the market in 2011, the challenge will be bringing names that have sub-AAA ratings to the market. One DCM banker says that in terms of volume, 2010 was the biggest year for the local market. However, he adds that despite record volumes, the number of bond issues in 2010 far less than in 2006 or 2007. “Investors have been very picky with names and ratings, so we hope to be able to bring new issuers to the market in 2011,” says another DCM banker. “This will also prove more attractive to investors as there has been a significant volume of issuance from names like Pemex, so investors could have reached their limits for these names,” he adds. Bankers say they will look for new structures in order to allow sub-investment grade names to come to the market. One head of DCM adds that he expects a significant amount of issuance for PPP infrastructure projects, such as for motorways, which he expects will be very active this year, after projects stalled during the crisis. The competition to lead deals mean bankers expect downward pressure on fees this year, though not on pricing, as they say investors will not be prepared to accept lower spreads. On the contrary, investors expect spreads to increase by 20bp to 30bp in 2011, though they say this
Posted inDaily Brief
CAF Supports Paraguay Banks
CAF has approved 2 lines of credit, for $15m each, to BBVA Paraguay and Banco Continental, according to the development bank. The credit facilities will be used to support financing to export clients and those that need to make mid-term investments.
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Peru Surprises with Rate Hike
Contrary to market expectations, Peru’s central bank tightened its rate by 25bp to 3.25%. The bank says the hike is a preventive measure to avoid inflationary pressures from being influenced by high domestic demand. Barclays, one of the shops expecting rates to remain unchanged, had forecast that Peru would not raise rates until March. Morgan Stanley had thought the central bank was likely to take comfort in the near term from benign inflation data and slowing economic growth to keep rates on hold.
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Bradesco Retaps Tier 2
Bradesco reopened its 2021 Tier 2 bonds for $500m, at about a 0.8 point concession. The 5.9% of 2021 bond reopened at 98.945 to yield 6.042%, or UST plus 262.5bp, at the tight end of 262.5bp-275.0bp guidance. The bond had been heard at 99.6-100.0 Thursday morning prior to the announcement, according to investors, and finished Thursday up 0.25 points from the reopening. The sale drew about $1bn in orders, according to a banker on the sale. The proceeds are marked for replenishing Tier 2 capital and for general corporate purposes. After the retap, the total outstanding size for both the original and the retap is $1.6bn, though the offer was set to be increased by up to $50m at the same terms overnight during Asian market hours. Bank of America Merrill Lynch, Bradesco, HSBC and JPMorgan managed the sale, done through the Cayman Island unit and listed in Luxembourg. Bradesco had met investors in November about a global BRL sale, anticipated as a 2015 at about BRL500m, and is heard to still be considering the issue. Bankers are still actively pitching Tier 2 issuance to LatAm banks this year, after $8.67bn in issuance in 2010 through 17 deals, as growing institutions continue to need the capital. The deal follows a $530m 2016 senior bond from Bancolombia Wednesday, with a possible Euro bond on the way next week from Banco do Brasil.
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BBVA Bancomer Looks to Mexico DCM
BBVA Bancomer is also looking to tap the market in January, according to a filing. The bank is expected to come to the market on 28 January, according to a report by Scotia Capital, though the size and maturity of the bonds have not yet been determined. The bonds are rated AAA on a national scale and will pay a spread over the TIIE. The bank is leading the deal itself.
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Slim Spinoffs Mixed in Debut
Miner Minera Frisco shot up 20.9% Thursday, while real-estate firm Inmuebles Carso lost 19.7%, each in their first session after being spun off from Carlos Slim holdco Grupo Carso. With investors receiving a share in each new company for each Carso share they hold Thursday, Inmuebles closed at MXP11.27 after opening at MXP13.43, and Frisco closed at MXP38.07 after opening at MXP30.14. Initial prices were determined before the market opened Thursday, with Carso starting at MXP34.44 following the split and closing at MXP34.16 Thursday. Carso shares had gained 61.3% in the period from the August 24 announcement of the intent to spin off through Wednesday, reaching MXP78.36. Inmuebles, led by CEO Gerardo Kuri, buys, sells and develops buildings. It had net assets of MXP22.8bn as of the first half of 2010, Carso says. Frisco, with CEO Justo Wong, mines silver, lead, zinc and copper, and had MXP3.77bn in assets in the first half of 2010. No new funds were raised.