Category: Chile

Chile’s Cueto family, which owns a 25% stake in LAN Airlines through its Costa Verde Aeronautica holdings, says it is buying only an 8.6% additional stake in the airline from Axxion and Inversiones Santa Cecilia, which are controlled by president-elect Sebastian Pinera. The move, which will cost the Cuetos CLP264bn ($488m), has surprised market watchers who expected the family to purchase all of the 21.10% in LAN it had a right of first refusal on. Costa Verde had also recently announced plans to raise $1bn equivalent in additional equity, a deal presumed to be done in anticipation of the full exercising of the LAN stake option. The move opens the possibility for Brazil’s TAM to buy a larger stake in LAN than originally what was originally expected by the market. Brian Moretti, equities analyst at Planner Corretora in Sao Paulo, writes in a research note that TAM has around $725m in cash, enough to acquire the remaining 12.5% stake held by the Chilean entities. Based on the CLP9,100 per share paid by Costa Verde Aeronautica, the remaining stake could be worth CLP391bn ($723m). The Cuetos are paying for their smaller stake with CLP237bn going to Axxion and CLP27bn to Inversiones Santa Cecilia. Of the total amount, the buyers say they will pay CLP132bn in cash at closing and the remaining CLP105bn in installments.

Chilean retailer Falabella may be considering a dollar bond transaction, investors say, after a day of meeting the New York buyside last week. The visit was not tied to any planned transaction, nor was it clear if Falabella would look to issue soon. Investors note that dollar issuance from Falabella would need to be sizeable to make it worth going outside Chilean domestic markets, where it is a frequent and well-established AA issuer. Deutsche Bank was managing the meetings, according to investors, though it is not clear if the bank has a specific mandate from the retailer. A Falabella finance official says there are no immediate plans for either dollar or local issuance.

Barrick Gold has agreed to pay $475m for 25% of the Chilean Cerro Casale gold mining project from Kinross Gold. Of the total amount, Barrick will pay $455m in cash, the buyer says. In addition, a $20m so-called contingent obligation contract, which was payable by Kinross to Barrick, was canceled. After the close of the deal, Barrick’s interest in Cerro Casale will increase to 75%. On a life-of- mine basis, Barrick says its share of average annual production is anticipated to be about 600,000-650,000 ounces of gold and about 170m-190m pounds of copper at total cash costs of about $140-$160 per ounce. A Barrick spokesman says the deal was privately negotiated.

Goldcorp has acquired a 70% stake in the El Morro copper and gold project in Chile’s Atacama region from New Gold, says the buyer. As part of the deal, Goldcorp loaned New Gold $463m so it could purchase the 70% stake in the project from Xstrata Chile by exercising its right of first refusal. Once New Gold acquired the stake in Xstrata Chile, Goldcorp proceeded to acquire it from New Gold. It also transferred $50m in cash to New Gold. With the completion of these transactions, El Morro is now owned 70% by Goldcorp and 30% by New Gold. This deal, originally announced in January, was delayed when Barrick Gold sued New Gold over the right to buy the 70% stake. Barrick, who challenges the legality of New Gold’s purchase, says it will continue to challenge the deal. Goldcorp’s financial advisors are GMP Securities, and legal counsel are Cassels Brock & Blackwell. New Gold’s financial advisor is BMO Capital Markets and it was aided by Lawson Lundell on the legal side. El Morro is an advanced stage copper and gold project in north-central Chile. Goldcorp says it contains proven and probable reserves of 6.7m ounces of gold and 5.7bn pounds of copper. Goldcorp president Chuck Jeannes says El Morro is in “one of the best mining jurisdictions in South America.” Goldcorp has operations throughout the Americas and says its gold production is 100% unhedged.

Celfin Capital has purchase a 9.7% stake in Chile’s Clinica Las Condes that belonged to Chilean president-elect Sebastian Pinera’s Bancard Inversiones, for a total of about $37m, or CLP25,100 per share. LarrainVial, which handled the auction, had said it would offer the 792,338 shares for a minimum CLP24,000 apiece. Pinera is also seeking to divest his 26% stake in LAN Airlines before he becomes president on March 11. Local groups and Brazil’s TAM are heard to be likely purchasers.

As was widely expected, Chile’s central bank kept its monetary policy rate at 0.5%. It says that on one hand, global volatility had hurt the price of copper and oil, and on the other, domestic activity is expanding faster than expected, unemployment is on a downward trend and credit conditions have stabilized. “We continue to expect the central bank to begin raising the policy rate in July, but see risks slightly tilted to the earlier side, given the strong tone of recent activity data and the CLP depreciation,” says Barclays. Bulltick expects the bank to remain on hold at 0.5% through H1 and raise rates a total of 150bp to 2.0% in 2010. “We expect inflation to end the year at 2.13%, GDP to expand 5.0%, and the CLP to rebound to CLP500 per USD,” the shop adds.

Bancard Inversiones, an investment vehicle controlled by Chile’s president elect Sebastian Pinera, will auction the 9.7% stake, or 792,338 shares, it holds in Clinica Las Condes on February 16, for a minimum price of CLP24,000, confirms a source with knowledge of the deal. LarrainVial will handle the auction. The shares closed at CLP25,000 on the day of the announcement, bringing the total value of the stake to $36m. Pinera is also seeking to divest his 26% stake in LAN Airlines before he becomes president on March 11.

Chile’s outgoing president Michelle Bachelet has named a new board of directors at state-owned copper producer Codelco. The new board, to be chaired by current board member Nicolas Majiluf, will take office March 1. It will be responsible for choosing a CEO to succeed Jose Pablo Arellano, who has said he will not continue beyond March. The board includes former national budget director Alberto Arenas, former Codelco CEO Marcos Lima, Andres Sanfuentes and Marcos Buchi. Arenas, Sanfuentes and Majiluf will be on the board until May 11 this year, while Lima and Buchi will remain there until May 2011.

Chile’s central bank is seen keeping its monetary policy rate at 0.5% today and is not expected to hike it until at least 2Q, say Morgan Stanley and Barclays, in line with market consensus. “Although the central bank is likely to maintain the language regarding the stability of the policy rate at 0.5% until ‘at least Q2,’ it will probably at least highlight the recent peso depreciation in the accompanying statement,” Barclays says. The CLP has depreciated to CLP550 per USD on February 10 from CLP535 per USD February 1. Morgan Stanley believes that the ongoing economic recovery remains on track and broadly in line with the central bank’s base scenario. Although base effects should push annual inflation into positive territory as early as this month, it says price pressures remain largely muted. It forecasts annual inflation will reach 2.6% by the end of 2010, from a contraction of 1.4% at the end of 2009.