Category: Chile

Dutch financial conglomerate ING has sold its annuities and mortgage assets in Chile to local privately held company Corp Group Vida Chile, the seller says in a filing with the local securities commission. A source with knowledge of the deal says that press reports indicating the deal value is around $350m “are not out of context.” A source close to the seller also says the price is “around that amount.” Citi and a joint venture between Banchile and Citi advised ING, while Corpvida did not have external advisors on the deal, market sources say.

Chilean department-store chain Empresas La Polar plans to raise CLP50bn ($92.5m) through the issuance of new shares, pending shareholder approval August 21. The company’s board will decide on the price of the new units and process for issuing them. It does not state how many shares it will sell to reach the total amount. It closed at CLP2198.90 Friday.

France’s Lafarge has sold its Chilean cement, aggregates and concrete assets to Peru’s Brescia Group for $555m enterprise value, equal to 7.4x 2008 Ebitda. Chile-based analysts say the price paid for the package 84% owned by Lafarge Chile is fair to cheap. A Santiago-based equity analyst covering similar industries, who asks not to be identified, calculates that the transaction is in line with expectations. In 2004, he adds, Chile’s SQM sold a 14.05% share in Lafarge predecessor Empresas Melon for $69m, or about 7.2x Ebitda. However, another Chile-based analyst notes that other recent LatAm transactions in the construction industry have been done at 8x-10x Ebitda. In May, Lafarge announced it sold similar assets in Turkey for EUR163m, or 10x Ebitda. Lafarge’s Santiago stock closed down 1.8% at CLP58.9 Tuesday and the deal is valued at CLP54.2 per share, according to a filing with the Chilean securities commission. The transaction will be effective by August 31, following the launch of a public tender to purchase minority interests by the buyer for Lafarge Chile. Lafarge’s minority participation in its Chilean gypsum activities is not included in the sale. Celfin advised Brescia and Rothschild worked with Lafarge, which has been in Chile since 2001 through Lafarge Chile and Immobiliaria San Patricio. The assets sold include the La Calera cement plant, located around 100km from Santiago with a capacity of 1.5m tonnes, along with the Puerto Montt grinding station in southern Chile, which has a capacity of 300,000 tonnes. Lafarge is also selling 54 ready-mix concrete units, 5 aggregates quarries, an import terminal and a mortar production unit. The transaction is part of Lafarge’s announced 2009 EUR1bn divestment program, which is 75% complete.

Chile’s Arauco paid $7.7m in underwriting fees for its $500m 2019 bond issue priced Wednesday, according to a term sheet. The amount translates to about 1.54%, putting it closer to a US high yield commission than a LatAm high grade. The BBB/Baa2/BBB minus rated producer of pulp and wood products priced at 98.910 with a 7.250% coupon to yield 7.406%, or UST+387.5bp, the tight end of UST+400bp area guidance. The sale saw $2.5bn in demand. JPMorgan managed the sale, with BBVA and Santander as passive bookrunners.

Banco de Chile has sold $193m equivalent in peso-denominated and inflation-linked bonds on the domestic market. The bank priced UF3m ($117.9m) in 4.60% of 2029 bonds at 99.15 to yield 4.70%, and CLP40bn ($75m) in 6.00% of 2014 bonds at 98.70 to yield 6.30%. Proceeds will go towards refinancing debt and other needs. Banchile, the brokerage unit of Banco de Chile, managed the transaction.

Glassmaker Cristalerias de Chile has filed to sell up to UF2m ($79m) in domestic inflation linked bonds. Cristalerias can choose among 2014 and 2030 notes, in a deal expected to be led by IM Trust. It last visited the domestic market in 2005, selling $54m-equivalent in 3.4% of 2026 UF bonds through IM Trust.

In a rare pure corporate deal, Chile’s Celulosa Arauco y Constitucion has sold $500m in 2019 bonds on the back of $2.5bn in demand. The BBB/Baa2/BBB minus rated producer of pulp and wood products priced at 98.910 with a 7.250% coupon to yield 7.406%, or UST+387.5bp, the tight end of UST+400bp area guidance. As with much of the recent heavily subscribed new quasi-sovereign issuance, the bond traded up in the gray, about 2 points according to investors. This suggests that the market is open to non-government backed high-grade credits, especially if they offer sufficient concession.”It offers a pickup over what’s in the market,” notes a New York-based EM-dedicated investor, also noting a relative scarcity of quality Chilean corporates. A banker on the deal puts Arauco’s existing 2015 and 2017s at T+377bp-378bp if interpolated out to a 2019 spot on the curve, suggesting a 10bp premium for the new bond. Bankers away from the deal spot such a premium at 15bp-20bp. “They are getting good terms,” notes one, who sees US-based comp International Paper’s 2019 (rated BBB) trading to yield 8.25%. About 150 accounts formed the book, according to a banker on the deal. JPMorgan led, with BBVA and Santander as passive bookrunners. Proceeds are for general corporate purposes and to repay debt amortizations. Arauco is working to address short-term leverage, among the reasons cited by S&P for a downgrade this month to BBB from BBB+. Arauco, which is owned by conglomerate Copec – in turn controlled by investment firm AntarChile – sold $146m equivalent in 2014 and 2030 bonds on the domestic market in March. It last visited the dollar market in 2005 with a $400m 5.625% of 2015 via JPMorgan. New York DCM bankers say more LatAm corporates could be on the way next week, following an Eletrobras issue today, including a benchmark offer from Petrotrin.

Chile’s Arauco concluded a two-day roadshow Tuesday, with a 2019 bond set to follow as soon as today. Investors expect a $300m-$600m issue that could yield in the mid 7% area. JPMorgan is managing the Baa3 rated sale, which provides a test for non-government supported investment-grade credit, following a recent stream of quasi-sovereigns and sovereigns. Elsewhere, Brazil’s Eletrobras is set to conclude its roadshow today, and follow it this week with a 2019 bond of $600m-$1bn in size via Credit Suisse, seen coming in the low 7% handle yield.

Chile’s Transelec is looking to swap dollar debt for peso debt, and has launched a tender offer to buy up to $220m of its outstanding 7.825% of 2011 bonds. The transmitter is offering to pay principal plus accrued interest at 200bp over the yield on the 2011 US Treasury bond. Holders tendering by July 28 will receive an additional $30 per $1,000. The tender offer expires August 14, contingent on a $100m minimum acceptance and Transelec’s successful raising of debt domestically. HSBC is dealer manager. Transelec originally sold $400m of the 2011s in 2001 through ABN AMRO and Salomon Smith Barney. Its most recent domestic bond was a $22m equivalent 4.5% 2027 inflation-linked note sold in April 2008 through Bancoestado.

S&P has placed Chile-based CAP’s BBB minus ratings on credit watch negative as it expects significant deterioration in its financial risk profile because of lower cashflow generation as sales drop amid the global economic slowdown. “We expect that weaker cashflow generation and financial ratios could potentially reduce the company’s high cash position of $381m as of March 31,” S&P says. It adds that this would result if the ferrous metal company is not able to internally finance capex and dividends, and if it breaches certain financial covenants included in the terms and conditions of a $150m outstanding bank loan, which could potentially trigger early repayment.