Category: Chile

Chile does not plan to issue a dollar bond this year, finance minister Andres Velasco says. “Chile has been authorized to issue a little more than $2.7bn in debt. It has already announced plans to issue this amount domestically,” Velasco tells reporters Thursday on a New York visit. Chile’s government announced plans this month t to sell $1.7bn equivalent in 5 and 10-year peso and UF-dominated domestic bonds, in addition to the $1bn it announced in January. Velasco says the Chilean economy likely will show negative year-on-year growth during the next few months, before seeing some recovery later this year. He declines to state whether he believes the Chilean economy already has already bottomed out.

Chile’s Celulosa Arauco y Constitucion has added its name to the list of LatAm issuers looking to jump on investor demand before the summer hiatus. The producer of pulp and wood products is preparing to sell a “benchmark size” 2019 dollar bond. The BBB/Baa2 issuer begins investor meetings today on the US West Coast, followed by visits to Boston Monday and New York Tuesday, with a sale to follow, depending on market conditions. JPMorgan is managing the process, with BBVA and Santander as passive bookrunners. The issuer this week was downgraded to BBB from BBB+ by S&P and had its outlook lowered to negative from stable by Moody’s, amid concerns about short-term leverage. It sold $146m equivalent in 2014 and 2030 bonds on the domestic market in March, and last visited the dollar market in 2005 with a $400m 5.625% 2015, also via JPM. The mandate represents the latest in a string for JPMorgan, following Ecopetrol and EPM. JPMorgan and Credit Suisse are rumored to be running a bond deal for Trinidad’s Petrotrin, and JPMorgan is likely to score a mandate for a dollar issue later this year from Brazil’s Cemig, after conducting the borrower’s non-deal road show this Spring.

Moody’s has changed Arauco’s outlook to negative from stable, saying the Chilean company faces operating and credit protection challenges that could undermine its Baa2 rating. The agency says Arauco’s margins in 2009 have declined due to a deterioration in the global economy and sharp declines in volume and price across all business segments. Moody’s believes margin pressure will continue over the intermediate term despite recent benefits achieved from lower input costs. The previous day, S&P cut Arauco’s rating to BBB from BBB+ on weaker-than-expected projected financial performance that it says will likely prevent the company reducing short-term leverage. As of March 31, Arauco had about $2.7bn in financial debt. The total debt-to-Ebitda ratio is less than 3x.

Antofagasta subsidiary Antofagasta Railway has acquired a 40% in GDF Suez’s Inversiones Hornitos, which owns the 150MW thermoelectric power plant being built in Chile. Antofagasta will cover 40% of the $400m needed to build the plant, the buyer says. The plant will provide energy to the buyer’s Esperanza copper-gold mine.

S&P has cut Chile-based Celulosa Arauco y Constitucion (Arauco) to BBB from BBB+ based on the firm’s weaker-than-expected projected financial performance that it says will likely prevent the company reducing short-term leverage. “Nevertheless, we expect Arauco to continue to benefit from a very strong competitive position; a manageable, well-structured debt maturity profile; still-adequate credit measures; and very good access to refinancing,” says S&P. As of March 31, Arauco had about $2.7bn in financial debt. The total debt-to-Ebitda ratio is less than 3x.

Chile’s Electro Metalurgica has sold $57m equivalent in inflation-linked bonds on the local market. The producer and supplier of steel and iron components for the mining industry priced UF1.5m ($57m) in 2032 bonds at 101.01 with a 4.60% coupon to yield 4.50%. The notes feature a 10-year grace period. Elecmetal plans to refinance debt with the proceeds. IM Trust managed the sale, rated AA on a national scale.

Chile’s government plans to sell 5 and 10-year domestic bonds monthly from mid-July through December, the Hacienda says. Last month, it announced it would issue $1.7bn equivalent in local bonds to finance a projected fiscal deficit. The auctions will offer a combined total of CLP170bn in 5-year peso-denominated bonds, UF13.5m in UF-denominated inflation-indexed 5-year bonds and UF25m in 10-year notes.

Chile and Peru have both continued with monetary easing, in line with expectations. Chile’s central bank has cut its monetary policy rate by 25bp to 0.50% and says it may stay at this level for a “prolonged period.” It aims to lower inflation to a target rate of 3.0% from 3.6% currently. The easing is in line with what Celfin Capital and Barclays expected. Barclays predicts this will be the last easing, saying that further reductions may create distortions. The consensus expects the rate to be increased to 1.5% by May 2010. Peru meanwhile cut by 100bp to 2.0%, more than the 50bp reduction that had been expected, following a fall in inflation.

Chile’s Vapores has successfully completed the first stage of its capital increase plan, raising $145m equivalent from the sale of shares. The shipping company exceeded its original goal of raising $130m, in the first phase of a 3-part $710m fundraising. The plan, announced in May, will serve to raise funds to pay debt with foreign ship owners. Stage 2 aims to raise $220m, and the third $360m. German-based clients have already committed participation guaranteeing 100% subscription of the third phase.

Real estate private equity manager Equity International (EI) has sold back a 13.5% stake in Chile’s Parque Arauco, a shopping mall owner and operator, to Grupo Said for about $65m. The shop confirmed the deal but could not disclose more information regarding the sale. EI first bought a 12.5% stake in Parque Arauco in September 2006 for about $50m through a new share placement after it was asked by Grupo Said, the founder and primary shareholder of Parque Arauco, to provide growth capital and expertise to accelerate Parque Arauco’s expansion plans. This was its first investment in the southern cone country.