Category: Chile

Chilean construction company Salfacorp says it has agreed to acquire privately held peer Empresas Tecsa. The buyer does not say how much it will pay for the target. Tecsa, which is controlled by Chile’s Binder family, in 2009 reported revenue of CLP192.5bn ($387m), which it says makes it Chile’s fourth largest construction company after Salfacorp, which is the largest, Besalco and Socovesa. Salfacorp says that due diligence is underway and that closing of the deal is expected by the end of April. Salfacorp’s shares jumped 7.5% after it announced the deal, closing at CLP1,914. The company does not name any financial advisors.

Chilean power transmission company Transelec plans to issue UF6.5m ($282m) to refinance debt maturing in April, says a company spokeswoman. The A+ rated notes will be issued in 2 tranches, one for 10 years and the other for 30. Corpbanca and Scotia are leading the sale.

Codelco’s board has given the green light to begin the public sale of its shares in power company E-CL. The state-owned Chilean copper miner plans to float the 40% of the company it owns on the local market and in the US, a plan which had been among the options it had been considering for the asset since the middle of last year. A 3-week roadshow is set to begin Monday that will include meetings in the local, US, and other markets, according to a banker on the deal. Codelco hired LarrainVial and JPMorgan, which have been advising it on strategic alternatives, as coordinators. Santander is co-manager. Analysts have estimated the stake would be worth about $1.1bn. Codelco co-owns E-CL with France’s GDF Suez, which holds a 52.4% stake, in addition to a 7.6% free float. Though GDF Suez has shown interest in buying Codelco’s position, the banker on the deal says they do not have any preferential right in the divesture. Proceeds of the sale are expected to be used to fund the copper miner’s investment plans. E-CL shares closed Friday at CLP1,221. Chile’s government has been considering the sale of E-CL and some of its other large assets as it maps out funding for earthquake reconstruction costs. It has said multiple times that a sale of part of Codelco itself is off the table.

Banco de Chile is expected to close syndication on a $150m 3-year loan by January 14, with signing expected by the end of the month, according to bankers with knowledge of the transaction. The loan is being marketed only to Asian investors, after bank meetings took place in Taiwan in December. Standard Chartered and Wells Fargo are joint leads. Bankers away from the deal expect pricing at 110bp over Libor, which one banker says is attractive pricing for the borrower.

Chilean retailer Cencosud, which is roadshowing a likely dollar bond, is also heard considering adding global CLP to the mix. The retailer, scheduled to wrap up the “non-deal” US, European and LatAm meetings Tuesday, is heard looking to do a 10-year bond for up to $1bn and may also add a CLP tranche, according to investors following the process. Investors estimate a dollar debut from Baa3/BBB minus Cencosud to come in the neighborhood of UST plus 225bp-275bp. Direct comps are difficult, though some point to the most recent triple B Chilean pure corporate, paper maker Arauco (Baa2/BBB/BBB+), which got a 5.115% yield, or UST plus 245bp in September on a $400m 10-year. Arauco now trades at UST plus 155bp, according to a trader, who notes a good part of the tightening is owed to UST movement. Chile’s largest retailer benefits from strong business and geographic diversification and focus on the defensive food retail sector, Moody’s notes. Investors weigh such positives against an ambitious 2011 expansion plan, high leverage, and risk associated with about 30% of its business in Argentina. Deutsche Bank, JPMorgan and Santander are managing the investor meetings. Also in the pipe for this week are BRMalls, seeking a NC5 perpetual through BTG and Deutsche, and Banco do Brasil, aiming to place a new euro-denominated bond. Both are scheduled to start roadshows today. Brazil’s Banco Cruzeiro do Sul is also expected to initiate the sale process for a senior 5-year bond as soon as this week.

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

Chilean car loan company Forum is heard to be planning to issue around CLP21bn ($44m) in local bonds with a tenor of up to 5 years to finance lending operations, local DCM bankers say. “The company is more likely to issue in CLP because their revenues are in CLP,” says one, adding that Forum is rated AA+/AA minus. He also explains that if the company opts for a 5-year bond, it could get a spread of around 100-120bp over the BCP benchmark. A second banker agrees, but says that the spread could be affected by recently announced market intervention by the local central bank, which has caused the benchmark to increase by 20bp-25bp. On January 5, Chile’s central bank began purchasing US dollars, buying a total of $50m, according to Nomura, and plans to acquire a total of $12bn by February 9. The banker adds that the Forum issue could take place this month. Banchile is leading the issue.

Chile agribusiness Copeval is considering issuing up to UF2.5m ($110m) in local bonds to fund capex, say bankers away from the deal. The issue will consist of at least 2 pieces, one with a 10-year tenor and the other for 30 years. The BBB+ notes could have a spread of around 150bp over the BCU benchmark, the bankers say, but caution that this could be affected by recent market intervention, which has pushed the benchmark out 20bp-25bp. IM Trust is heard leading the sale.

Chile’s Pampa Calichera says it plans to raise $320m in equity to develop its businesses and pay off debt. The holding company for mining, chemical and other interests plans to put the capital increase to shareholders at its January 19 meeting. Calichera owns a stake in chemical and fertilizer maker SQM, and is controlled by Inversiones Oro Blanco.

Chilean retailer Cencosud is set to meet investors ahead of what would be its first dollar bond, starting off a year LatAm bankers hope will see many first-time USD issuers. After being heard last month seeking a 10-year benchmark, Cencosud will meet investors January 6-11, in New York, London, Switzerland, Los Angeles, Boston, Bogota and Lima on a “non-deal” roadshow led by Deutsche Bank, JPMorgan and Santander, according to investors. Baa3/BBB minus Cencosud enters 2011 with an ambitious expansion plan, with analysts estimating a $1bn spend this year. Chileans could account for a decent part of issuance early in the year. CMPC has roadshowed and Falabella is expected with a benchmark as soon as this month. The first of a string of Argie debutants could also start appearing in January, from a pack including developer Raghsa and Argentine Gaming Group. “We should see a lot of high-yield issuance and new names early this year,” says a New York DCM banker, adding that some of the traditional January giants – Mexico, Brazil, BNDES, Petrobras, Colombia – also are monitoring markets. Among potential issuers, Brazil and BNDES will be faced with the choice of coming in USD or global BRL, while Petrobras must get cracking on what should be at least $4bn raised from capital markets in 2011. Also in the oil space, Argentina’s YPF is expected to return to markets soon, for about $600m.