Category: Chile

Chile’s Compania Cervecerias Unidas and CMR Falabella are both set to sell bonds in the domestic market today. CCU plans to sell up to UF5m ($180m) split between 3% 2014 notes and 4.25% of 2030 bonds which feature a 10-year grace period. The brewer, whose products include the Cristal brand, plans to refinance debt with the proceeds. Celfin is managing the sale, rated AA on a national scale. Separately, CMR Falabella, the credit service unit of retailer Falabella, is planning to sell up to CLP90bn ($155m) in 5% of 2015 bonds backed by credit card receivables. BCI Securitizadora is managing the transaction, rated AAA on a national scale.

Chilean retailer Falabella has acquired a 50% stake in Inmobiliaria Mall Calama, of which 25% was purchased from a Ripley subsidiary and the other 25% from a Cencosud subsidiary, the sellers say in separate announcements to the local securities superintendent. The deal, valued at a total of about $40m in cash, increases Falabella’s stake in the mall to 75%, says Banchile equity analyst Patricio Hernandez. He adds that the price Falabella paid is “not a bargain, but is still reasonable.” Spokeswomen from Cencosud and Ripley say that the companies considered the stakes as non-core and sold them to increase liquidity.

Chilean pulp and paper producer CMPC has placed $364m equivalent of inflation linked bonds in the local market. CMPC priced UF7m ($255m) in 2030s with a 4.3% coupon at 96.66 to yield 4.55%, and UF3m in 2014 bonds with a 2.9% coupon at 98.41 to yield 3.25%. It plans to use proceeds to refinance debt and help fund its investment plan. JPMorgan and Santander managed the sale, rated AA+ on a national scale.

Chile is the first LatAm country to officially enter into recession, says Bank of America-Merrill Lynch (BofA-ML). Fourth quarter results show that real GDP grew 0.2%, well below the shop’s consensus of 1.1% growth for the quarter. This takes annual growth in 2008 to 3.2%, less than BofA-ML’s estimate of 3.4%. “On seasonally adjusted terms, GDP contracted a larger-than-estimated 2.1% quarter-on-quarter,” says BofA-ML. “This formally confirms the expectation that, with two sequential declines, Chile is the first LatAm country to fit the definition of a technical recession,” it adds. In 2009, the bank expects Chile’s GDP to grow by only 0.2%.

Banco Santander Chile has registered to sell up to $220m equivalent in bonds denominated in the UF inflation-linked unit on the domestic market. The bank plans to issue up to UF3m each of 2013 and 2014 tranches, both with a 4.5% coupon. The bank’s own capital markets unit will manage the sale. Santander, rated AAA on a national scale, does not indicate a launch date.

Any LatAm issuer needing funds should jump on the window that opened up this week, not least Chile, which is flying on a Moody’s upgrade to A1 (positive) from A2. Last week’s blowout issue from A1 rated Israel presents a positive comp, and the sovereign has apparently been considering issuing bonds for several months. However, Chile has access to ample funds at home, and may not see value in a strategic overseas foray. Discussions are apparently focusing on the extent of crowding out for local corporates, but the sovereign seems in no hurry, despite the opportunity. Moody’s says Monday’s upgrade reflects strong resilience to adverse external shocks related to both the government’s robust foreign asset position, as well as a solid balance sheet and Chile’s status as net creditor. The agency lauds solid institutional and policy frameworks, as well as an economic policy framework designed to mitigate macro volatility. “It is quite remarkable that Chile earns a well deserved upgrade amid a period of major global financial and economic distress and significant contraction of activity,” says Goldman Sachs. “This macro management approach sets the standard to be followed by all other credits in the region,” it adds, noting that the promotion brings Moody’s in line with S&P and leaves Fitch a notch lower. Moody’s anticipates weak Chilean growth in the near term, but says long-term ratings look through the business cycle, adding that credit fundamentals will be unaffected. LatAm DCM bankers say that even though Chile may opt to wait, others might seek to take advantage of the Monday rally. Petrobras is rumored to be considering a tap, and other sovereigns may also try to get in before departing for the weekend’s IDB meetings in Medellin.

Moody’s has downgraded Telefonica Chile to Baa2 from Baa1 and cut the outlook to negative from stable. The agency says that credit risk has increased as intensifying competition is impacting the company’s pricing power and causing an ongoing trend of weaker margins and cashflow. “In addition, weaker economic conditions may drive further negative pressure on fixed telephony, a major business line already in decline due to mobile substitution and alternative cable TV bundled offerings, as well as on other developing business such as broadband access and pay TV,” says Moody’s. As of last December, the company had weak liquidity, with cash and marketable securities of CLP84bn to address CLP130bn in syndicated loans maturing this coming December, the agency adds. “Beyond 2009, debt refinancing will continue to remain a risk, since the company will need to pay down or roll over an average of CLP90bn annually until 2013,” says Moody’s. It adds that mitigants to refinancing risk include the ability to generate free cashflow for debt amortization and plans to refinance most of the loans either with relationship banks or in the local markets.

Chilean industrial group Sigdo Koppers has placed UF3m ($107m) in inflation-linked bonds in the local market. It priced UF1m in 4.10% coupon 10-year bonds at 97.51 to yield 4.97% and UF2m in 4.5% coupon 21-year bonds at 98.13 to yield 5.48%. The 2 series come with respective grace periods of 5 and 10 years. Proceeds will refinance debt and fund new investment. Banchile and BBVA are managing the sale, rated A on a national scale.

Chile’s Cia Sudamericana de Vapores has hired HSH Nordbank subsidiary HSH Corporate to advise on a new business plan aimed at dealing with a downturn in global shipping. The bank will be evaluating a possible sale of non-core assets and contract renegotiations among other cost-cutting measures, Vapores says. Revenue for 2008 totaled $4.9bn, up from $4.2bn in 2007. Meanwhile, assets for 2008 added up to $1.9bn, down from $2.0bn in 2007.

Chilean wood products maker Celulosa Arauco has sold $146m equivalent in 5 and 21-year domestic bonds denominated in the UF inflation-linked unit. It placed UF2m ($73m) in 4.25% of 2030 bonds at 96.93 to yield 4.54% and UF2m in 2.25% of 2014s at 95.08 to yield 3.5%. Proceeds are for refinancing debt and general corporate purposes. IM Trust managed the sale, rated AA on a national scale. Meanwhile, Chilean industrial group Sigdo Koppers is expected to sell today about $107m equivalent in 2019 and 2024 UF-denominated bonds through Banchile and BBVA.