Category: Chile

Chilean forestry products firm Celulosa Arauco is set to sell today up to UF4m ($144m) in local bonds denominated in pesos and the UF inflation-linked unit. Arauco is looking to complete the remaining UF4m from its UF10m global bond program, through which it reopened local debt markets in November with the sale of UF6m in 21-year and 6-year notes. It can place any combination of 4.5% 2014 peso denominated notes, 2.25% 2014 UF-denominated bonds, or 4.25% 2030 UF bonds. The issuer will use proceeds to refinance debt and for general corporate purposes. IM Trust is managing the sale, rated AA on a national scale. Arauco is controlled by fuel and forestry conglomerate Empresas Copec, and a grower and producer of wood pulp, sawn timber and wood panels operating in Chile, Argentina, Brazil and Uruguay. Fellow wood products maker CMPC is also planning to sell bonds in the domestic market, having filed for up to UF10m in 10 and 30-year bonds in a AA+ rated sale through JPMorgan and Santander.

Sigdo Koppers has launched investor presentations in preparation for Thursday’s sale of up to $107m-equivalent in bonds denominated in the UF inflation-linked unit. Depending on demand, the Chilean industrial conglomerate can issue any combination of 6.15% of 2019 peso-denominated bonds, 4.1% of 2019 UF-denominated bonds and 4.5% of 2030 UF-denominated bonds. The two 10-year series come with a 5-year grace period, and the 21-year notes feature a 10-year grace period. Proceeds will refinance debt and aid new investment. Banchile and BBVA are managing the sale, rated A on a national scale.

Chile’s Enap Sipetrol has sold its 50% stake in the North Bahariya block in Egypt to Sahara Oil and Gas for $65.5m in cash. Enap says it received 6 bids for the stake. An Enap spokeswoman says that it will not sell 3 other production and exploration assets in Egypt, or assets in Iran and Argentina, as some media had reported. She declines to state whether there were any financial advisors involved. Proceeds from the divestment will be used to finance project development, says the company.

Pacific Hydro, an Australian power sector sponsor, is seeking participants for a $212m Chilean hydropower facility after two of its main lenders – ING and BNP Paribas – dropped out in the final stages of club syndication. A banker at one of the shops declines to comment, noting only that generally, banks are being very judicious with capital. Bankers away from the two shops speculate lack of funds and a general retrenchment at the Dutch and French banks led to the decision to pull out. Pacific Hydro’s 4-bank club –Calyon, SocGen, WestLB and DnB Nord – now seeks at least one more lender to join the deal and plug a $40m gap. The facility has a 14-year tenor, including 2 remaining years of construction, which began in 2008. Pricing is heard starting at around 325bp over Libor, stepping up. Working in favor of the club is the fact that the project, called Chacayes, is financed with more than 50% equity from the sponsor, and that a solid offtaker, Endesa Chile’s Chilectra, has already signed a contract. The challenge will be to convince participants to enter the 14-year final deal, apparently the longest tenor in the pipeline of active LatAm deals today.

Chile’s central bank has once again taken an axe to its monetary policy rate, chopping off 250bp, more than the 175bp several shops had expected. The move brings the rate down to 2.25%. “The decision is based on a significant fall in inflation,” the central bank says, adding that it is committed to make inflation drop to 3.0%, from 5.5% in February. UBS Pactual expected a 175bp cut, but said the easing could end up being “250bp or even 300bp.” Credit Suisse had initially expected 100bp, but later revised its forecast to 175bp. Celfin predicted a 175bp reduction and expects further easing through 2009 as inflation trends down from a 9.9% peak in October. JPMorgan, which had anticipated a cut of 200bp-250bp, says the policy rate could fall to 1.0% by mid-year.

Chile is expected to continue significant loosening at today’s its monetary policy meeting, with analysts forecasting a 175bp-200bp cut. Credit Suisse, which previously thought the rate would be cut by 100bp, raised its forecast to 175bp. Bulltick Capital forecasts a 200bp cut as inflation has consistently posted negative monthly numbers since November 2008 and growth slows. “We see this current easing cycle as a front-loaded one that will take the benchmark policy rate to 2.25% by the end of the year,” the shop says. In February, the central bank cut the rate by 250bp to 4.75%.

S&P is affirming its A+ (stable) rating on the Republic of Chile, but rings alarm bells for corporates. “Further external shocks could impose greater financial strain on the nonbank private sector, potentially leading the sovereign to provide assistance and assuming added liabilities,” says the agency. “Although Chile’s overall international investment position has improved in recent years, the private sector’s reliance on net external financing remains a source of vulnerability during the global credit crunch,” adds S&P. GDP growth could fall below 1% in 2009, and copper prices might remain low, resulting in a current account deficit of more than 4% of GDP, it adds. “Such a scenario should not result in macroeconomic strain given the availability of fiscal reserves and Chile’s external flexibility,” adds S&P. It also raises concerns about Chile’s narrow economic base and high private-sector external debt.

There is no clear consensus on how much Chile’s central bank will shave off its monetary policy rate on March 12, but it will be more than 100bp, according to the forecasts of three shops. Credit Suisse sees the central bank trimming the monetary policy rate by 100bp to 3.75%, Celfin Capital predicts a 175bp reduction, while JPMorgan forecasts loosening of 200bp-250bp. Celfin says it continues to expect further easing through 2009 as inflation trends down from a 9.9% peak of October. Inflation was 5.5% in February, according to Chile’s central bank, and Celfin believes it will average 3.2% for the full year. It previously expected an average of 4.5%. JPMorgan also sees more rate cuts ahead, and says the policy rate could drop to 1.0% by mid-year.

Chilean wood products manufacturer Masisa plans to raise $100m by offering 1.33bn new shares to existing holders, at a price of 7.5 US cents each. The offer is from a $100m capital raising plan approved in December and the sale date will be set following regulatory approval. Masisa placed $103m equivalent in 5.25% of 2029 UF-denominated bonds in January.

LAN has filed for a program to sell up to $200m in 2 series of domestic bonds denominated in dollars, CLP or the UF inflation-linked unit. The Chilean airline has set a maximum tenor of 10 years for the first series, and 30 years for the second. LAN is raising funds to finance investments. It does not give an indication as to the timing of first issuance.