Fitch has downgraded Brazil’s OGX to B minus from B, it says, while sister EBX company OSX has added $120m cash from controlling shareholders though the partial exercise of a put option. In its rating action, Fitch points to concerns about OGX’s liquidity due to its aggressive acquisition last week of 13 exploratory blocks during a time in which the company is implementing an aggressive investment program and struggling to bring oil and gas production on line. “The exploratory blocks acquisition is valued at approximately $190m and has to be paid upfront within the next few months. Committed minimum investments for these blocks amount to $350m in the five-year exploratory period, which will further pressure OGX’s cash needs,” Fitch says. As of March 31, OGX had $4bn of total debt and $1.1bn of cash and marketable securities. OGX’s ambitious capex program of approximately $1.3bn in 2013 and low-to-negative Ebitda is expected to result in a large cash flow deficit during 2013. The agency believes there is a high likelihood that OGX will need to exercise a $1bn put option from its controlling shareholder in 2013 to fund a portion of its negative cash flow. The outlook is negative.
Category: Corporate & Sovereign Strategy
Fitch Raises Emgesa
Fitch has raised the rating of Colombian generation company Emgesa to BBB from BBB minus, it says. “The rating action reflects the strong financial performance of the company, robust cash flow generation and the expectation of a moderate to low financial leverage after the Quimbo project begins operations in 2015,” Fitch says. The 400-megawatt Quimbo hydroelectric plant is expected in commercial operation by 2015. The outlook is stable.
Bank Chairman Leaves Chilean Bolsa Post
Pablo Granifo, the chairman of Banco de Chile, has resigned as a board member with the Bolsa de Comercio de Santiago, the bolsa says. A replacement has not yet been named.
Espirito Santo Americas Head Joins SMBC
Carl Adams has joined Sumitomo Mitsui (SMBC), where he is heading its LatAm operation, according to people familiar with the matter. He started last week, after leaving Espirito Santo, where he had been head of structured finance, project finance and origination for the Americas since 2008. Damian Polla is to fill Adams’ role at Espirito Santo.
LatAm-focused Miner Names CFO
D. James Slattery has been named CFO of Capstone, the Canadian metals company says. He comes from Inmet Mining Corporation, where he was CFO for the last eight years. Copper-focused Capstone has a mine in Zacatecas, Mexico and is also involved in a development project in Chile in partnership with Korea Resources Corporation.
Fitch Puts Brazilian Builder in Single-B Territory
Fitch has assigned a first-time B+ rating to Brazilian builder Mendes Junior Trading e Engenharia, it says. The company is focused on heavy construction work for the industrial, infrastructure, oil and gas and power generation sectors. It lands in the single-B category due to its moderate business scale and a concentrated backlog on a small set of large projects linked with public sector clients. The agency also finds it lacks the conservative liquidity policy necessary to support a growing business model that relies on relevant working capital needs and is also exposed to the intense volatility inherent to the heavy construction sector. Liquidity is tight, with BRL89m ($44m) in cash reserves at the end of December 2012, covering 0.63x short-term debt. The outlook is stable.
Ashmore Strategist Promoted to Head of Research
Jan Dehn has taken over as head of research at Ashmore Investment Management, where he was previously co-head of research, according to a person with knowledge of the matter. The move follows the retirement from the firm of EM veteran and former head of research Jerome Booth, who remains a shareholder in the firm but will now pursue other projects through New Sparta, a private London-based office. Dehn has been at Ashmore since 2005, and was previously at Credit Suisse and the World Bank. Booth had been at Ashmore since 1999, and was previously at ANZ and the Inter-American Development Bank. Ashmore has $65bn under management in EM.
Deputy to Leave Fazenda
Nelson Barbosa plans to leave his position as Brazil’s deputy finance minister in June for “personal reasons,” the ministry says. Dyogo Oliveira, the ministry’s deputy executive-secretary, will become interim deputy finance minister. Barbosa has been with the ministry since 2006, and was previously at the planning ministry since 2003.
HRT Names CEO
Brazil’s HRT Participacoes em Petroleo has named Milton Franke as CEO, it says. He replaces Marcio Rocha Mello, who announced this past weekend his resignation as CEO of the exploration and production company after three years in the post. Mello remains as a board member. Franke has been with HRT since 2009, in positions overseeing engineering, drilling and production. He previously worked at Petrobras and Booz, Allen & Hamilton. Wagner Peres, president of HRT America, is also stepping down from his role, though he stays on with the board of directors. A replacement for Pires has not been named.
Fund manager rankings: Commodities fears take hold
Fund managers are trimming commodities exposures in favor of consumer and other industries, a survey of leading managers has found.