Category: Central America

AEI has closed a $350m 10-year term loan for construction of the 300MW Jaguar Energy Guatemala power plant, after tapping mostly regional lenders. The developer formerly known as Ashmore had sought a $500m A/B loan in 2008. But after waiting out the global credit crisis, it launched in December a single-tranche $350m 10-year loan paying Libor plus 575bp. It is led by Bancolombia and Cabei. Participants are: Guatemala’s Banco Industrial, G&T Continental, Banco Reformador and BAM, as well as HSBC, Panama’s Banco General and Costa Rica’s Bicsa. “With the regional banks we were able to have group of sophisticated lenders who could deliver quite fast,” Luis Alfredo Turizo, director of corporate finance at Bancolombia tells LatinFinance. The deal also features participation from the Biba Inversiones de Capital investment fund, administered by Bancolombia with commitments from Colombian pension funds. Turizo says this is the first fund of its kind under new legislation allowing for such investment. The project also counts on a $200m deferred payment financing from China Machine New Energy (CMNE), the contractor on the project. The facility is subordinate to the $350m loan, and is payable on project completion and convertible into equity at AEI’s option. CMNE is the first Chinese contractor to win an engineering, procurement and construction contract in Central America, says Turizo. Tickets on the loan were $10m-$50m, he adds, with the lead arrangers each committing $66.5m. The Jaguar plant near Puerto Quetzal has a 15-year power purchase agreement with local distribution companies owned by Spain’s Gas Natural, and should be online in 2013. Turizo says he expects to see more such regional lending groups in Central America.

With funding costs at attractive lows and an infrastructure pipeline to develop, Guatemala is considering its first dollar bond since 2004, finance minister Juan Alberto Fuentes tells LatinFinance. “We are evaluating possibilities. This year would be ideal and Guatemala is capable,” the official says. Congress should approve soon a plan allowing the government to issue $500m in the international markets, he says. A tenor has not been decided, though 10 years would be a likely possibility. Bankers in Cancun for the IDB meetings say that the Central American issuer is a good candidate to tap and there are plenty of shops pitching. Fuentes says proceeds of the sale would help fund infrastructure investments the government has planned including roads, ports and airports. The sovereign, rated BB+/Ba2/BB, does not have maturities to refinance until 2011. It also has good access to multilateral lines. Fuentes highlights the fact that Guatemala was one of the few economies in the region to grow in 2009. It expanded by 0.6%, owed to a reliance more on food exports as opposed to durable goods shipments. He expects 2% expansion in the economy this year. An improving picture in the US would also help remittances boost the economy. While conditions in the US have improved since last year, Fuentes does not see unemployment falling significantly in the short term.

Pantaleon, a Guatemalan sugar producer and among the largest of its kind in Central America, is in the process of raising $90m in various credit facilities to finance its expansion as sugar prices climb, say executives familiar with the process. The company is heard to have clinched a $20m 2-year secured export facility directly with Deutsche Bank. The loan, which is collateralized by sugar export contracts, is heard paying north of 300bp over Libor. Another 2-part A/B facility led by the IFC is also rumored in the works. A $35m 12-year A loan is pays close to 550bp over Libor, while a $35m B loan being considered by other multilaterals is heard offering around 500bp over, notes an executive close to Pantaleon.

The IMF expects Guatemala’s current account deficit to shrink to 1.6% of GDP in 2009 from 4.8% of GDP in 2008. The fund says the reduction comes as a decrease in imports offsets the fall in exports, tourism receipts, and remittances. JPMorgan forecasts suggest remittances to Guatemala should slide to about $4.1bn in 2009 from around $4.3bn in 2008. The IMF also says that as a result of reduced tax revenue, imports and increased public capital spending, the fiscal deficit of the central government could reach 3.4% of GDP in 2009 and drop to 3.0% of GDP in 2010. Also, the deficit of the consolidated public sector will reach 3.0% of GDP in 2009, and 2.6% of GDP in 2010, says JPM. The IMF notes that the Guatemalan authorities have reiterated their intention to continue treating the $935m stand-by arrangement announced in April as precautionary.

The World Bank has approved a $350m loan to Guatemala to help the country improve its fiscal and institutional policies and mitigate the impact of global crisis. The loan has a maturity period of 26.5 years, including a grace period of 8.5 years. JPMorgan says it sees little downside risk for Guatemala in getting the loan, as the country has relatively low public debt levels, which stand at about 18.1% of 2008 GDP.

The IMF has approved a $935m stand-by agreement for Guatemala, equivalent to 300% of quota. The Guatemalan authorities intend to treat the arrangement as precautionary, meaning that they do not intend to draw on the fund’s resources unless the need arises, the fund says. “The authorities’ fiscal program aims to provide some stimulus to the economy and protect the most vulnerable segment of the population,” says IMF deputy MD Murilo Portugal. The 2009 budget envisages higher spending on labor-intensive public infrastructure projects and a strengthening of the social safety net. “This countercyclical fiscal policy is possible given the low level of public debt, resulting from prudent fiscal policies pursued in the past,” says Portugal. He adds that Guatemala’s banking system is not exposed to risky structured financial products and has consolidated in recent years. “The authorities are nonetheless taking measures to safeguard the liquidity and capital positions of banks through adequate liquidity-provision arrangements by the central bank and a gradual increase in provisioning requirements . . . the government plans to further strengthen financial sector policies by enhancing supervision and regulation and strengthening the framework for bank resolution,” says Portugal.

Nicaragua has received interest from Russian private sector companies in developing a canal, Nicaraguan finance minister Alberto Guevara tells LatinFinance. “We continue with the plan of building a canal. Russia has recently presented the possibility of getting involved strategically,” says Guevara. The minister adds that interest is from private Russian companies and that the project is estimated to cost $20bn. Nicaragua has been discussing the venture for many years. The idea is to build a canal large enough to handle post-Panamax ships of up to 250,000 tons. It was expected to take 12 years to build and use one of 6 possible routes through Lake Nicaragua, aimed at cutting transit time from New York to California. Guevara adds that timing remains unclear and declines to give a possible timeframe. Meanwhile, a $4.5bn refinery and petrochemicals project is underway with Venezuelan help and is expected to take 3-4 years to come to fruition, says Guevara. The minister also notes interest from Brazilian companies including Queiroz Galvao, in a $350m hydro project. Above all, the minister stresses the importance of attracting private foreign capital to exploiting Nicaragua’s potential in power, infrastructure and tourism. “We don’t want all of this development to come from the state, we want an integrated approach,” says Guevara. Nicaragua is looking to secure around $500m from multilaterals to help exploit natural resources in the long term. “Measures need to be taken immediately to help the most vulnerable countries, like Central America,” Guevara says. “$100m would help us survive,” the minister adds, asked what this year’s needs are. Nicaragua continues to get energy resources from Venezuela, via the Banco del ALBA, for social projects. The minister notes highly favorable terms on the aid, but also sees growing problems in Venezuela.

The IMF is extending an 18-month stand-by agreement for approximately $950m to Guatemala. The bank says that the arrangement is precautionary, as the country has no immediate balance of payments need, and that the program is part of a preventive strategy to strengthen Guatemala’s liquidity cushion in the face of an uncertain global environment. Under such stand-by agreements, the sovereign does not pay any interest until it draws on the facility. In early March, Costa Rica was also in talks with the IMF for a stand-by, but no agreement has been reached yet.

Guatemala is considering negotiating an IMF stand-by arrangement, according to JPMorgan, which cites the fund’s Central America representative Alfred Schipke. “An official IMF delegation is scheduled to travel to Guatemala City later this month to formalize the offer, which is already under consideration by the central bank,” says JPMorgan. “Given that Guatemala is facing no immediate balance of payment issues, the stand-by agreement would be treated as precautionary, part of an overall strategy to enhance market confidence in the government’s policies and to strengthen the country’s financial defenses in the midst of the global crisis,” it adds. The shop notes that while size is uncertain, Guatemala’s IMF quota stands just north of $300m and El Salvador recently inked a similar stand-by worth three times its quota. “We welcome the prospects of a precautionary stand-by for Guatemala at a time when access to international credit sources is severely constrained,” JPMorgan concludes.

Remittances to DomRep are expected to rise 5.0% in 2008 to almost $3.2bn. Remittances to Guatemala, meanwhile, are expected to increase slightly to $4.28bn in 2008 from $4.13bn in 2007, according to JPMorgan. The trend is expected to slow down in 2009, says the shop. Remittances to DomRep are expected to remain flat in 2009 and Guatemala’s should drop to $4.06bn, as the international financial crisis takes a toll on both countries.