Fitch has lowered the credit rating of Brazil’s Centrais Eletricas Brasileiras (Eletrobras) to BB from BBB, it says, reflecting the state-owned utility’s decision to accept the early renewal of concessions expiring 2015-2017. Brazil’s government offered Eletrobras approximately BRL14bn ($6.73bn) as an upfront payment to renew its concessions for a period of 30 years beginning in January 2013, with additional non-defined amounts, which will likely be paid over the life of the concession period. Eletrobras has indicated it will not use the proceeds to repay debt, unlike other utilities offered similar deals. “The upfront payment is not enough for Eletrobras to adjust its capital structure to a level that will still be in line with the company’s credit quality,” Fitch says. The outlook is negative. “Moody’s and S&P are very likely to follow, which should trigger index exclusion and a fair degree of forced selling [of Eletrobras bonds],”Barclays says in a note that recommends selling the bonds.
Category: Daily Brief
Gases de Occidente Advances Bond
Gases de Occidente has been authorized to sell COP200bn ($110m) in Colombia’s domestic bond market, it says. The issuer can choose from five possible tranches, with terms between two and 20 years. The proceeds are being used to replace existing liabilities and pay for investments. Corficolombiana is managing the sale, rated AAA on a national scale. Elsewhere in Colombia’s market, Emgesa is planning to issue up to COP300bn ($166m) Wednesday, with the ability to upsize to COP500bn.
Gavea Preps RE Fund of Funds
Brazil’s Gavea Investimentos is preparing a BRL200m ($96m) fund of funds investing in other real estate funds and securities, according to a regulatory filing. The Gavea Fundo de Fundos de Investimento Imobiliario plans to invest in other fundo de investimento imobiliario (FII) transactions, as well as in certificados de recebiveis imobiliarios (CRI), letras hipotecarias and letras de credito imobiliario. The transaction can be upsized by up to 20%, and requires a minimum BRL50m participation. Gavea’s own distributor will manage the sale, with Bradesco as administrator. It expects to begin meeting investors in January.
Hospital Looks to Continue Mexican ABS Expansion
Mexico’s domestic ABS market appears set to see a continued expansion in bonds backed by public service contract receivables, with a health services provider eyeing a transaction and others likely to follow. A prison contract securitization from builder ICA last year broke new ground in the space, and bankers and investors have been expecting others with government deals to monetize their future payments. Desarollo y Operacion de Infraestructura Hospitalaria de Ixtapaluca (DOIHI) plans what would be Mexico’s first transaction backed by hospital service contracts, according to sources familiar with the matter. The 22-year notes are guaranteed by future payments from contracts the specialty Ixtapaluca hospital has with Mexico’s health ministry to operate hospital facilities. The transaction is expected as soon as January, following a preliminary investor presentation last month, and should have a size of up to MXP1.8bn ($140m). “The scheme helps to develop and construct infrastructure in Mexico in association with the private sector in Mexico,” says a person familiar with the transaction. The project is one of various contracts the government has awarded for hospital services. Some of the others would, like ICA’s, involve construction, and might also be securitization candidates. ICA’s Sarre and Papagos units sold MXP7.1bn in 21-year bonds backed by contracts to construct and operate two prisons in September 2011, the first domestic bond to fund a project with construction risk. The key for all transactions is the contract the issuer has with the government entity. At the time, DCM bankers fully expected more public service contract securitizations to follow ICA, noting the sector is unimportant, as long as there is government support. The DOIHI transaction is expected to target typical long-term investors such as Afores and insurance companies. Banamex is leading the deal, rated AAA on a national scale. The hospital is located in the state of Mexico, west of Mexico C
Interacciones Sets Price Target
Mexico’s Grupo Financiero Interacciones is heard seeking to pay TIIE+135bp-area on a new MXP1.5bn ($117m) 3-year bond in the domestic market. The sale is expected Friday, and will raise funds to maintain liquidity and for general corporate purposes. Though it issued subordinated debt last month, the bank’s last senior local sale, for MXP2bn, came in March at TIIE+115bp. The issuer had the intention of returning to the market sooner after the March sale, and postponed due to Mexican elections, sub-national debt concerns, and the bank’s subordinated debt rating put under review by the ratings agencies, says a banker on the deal. It may now face slightly wider spreads. Interacciones is leading the transaction, rated A/A+ on a national scale. Interacciones, which specializes in sub-national and public infrastructure financing, last month raised MXP700m in 2022 Subordinated Bonds at TIIE+250bp.
Ipiranga Clinches Debentures
Ipiranga Produtos de Petroleo has completed the sale of BRL600m ($288m) in Brazil’s local bond market, according to Anbima. The 2017 debenture pays 107.9% of the DI, in line with the issuer’s expectations. The fuel distributor is raising funds to repay debt. Bradesco managed the sale, done under the rule 476 restricted format.
JPMorgan Names LatAm Banking Heads
JPMorgan has named Alejandro Guevara and Lisandro Miguens as co-heads of banking for Latin America, it says. The role had previously fallen under the responsibilities of LatAm CEO Nicolas Aguzin, who last week became the bank’s deputy CEO of Asia. Aguzin was replaced as LatAm CEO by Martin Marron, with Guevara and Miguens now heading LatAm banking, which covers investment banking, DCM, ECM and M&A in the region. Guevara had been head of credit for South America, and has been head of the LatAm global corporate bank since 2006. Miguens comes from the posts of senior country officer for the Andean, Central American and Caribbean region and head of investment banking for Mexico, Central America and Colombia.
Mexico Lays out Borrowing Agenda
Mexico’s finance ministry is proposing to borrow as much as $7bn in the international debt markets and raise MXP415bn ($32.3bn) from the domestic market next year, according to a proposal it has sent to congress for approval. The government highlights the use of syndicated bond transactions on the domestic side, through which it has sold MXP84.4bn this year in 5, 10 and 30-year bonds. Internationally, it plans to evaluate several funding sources in addition to USD, it says, including the yen, euro, and British pound. Mexico has raised $4bn in the dollar bond markets in 2012, and also visited Japan for $1bn-equivalent. It last hit the Euro market in 2010, and has not issued in GBP since 2004, according to Dealogic data.
NADB Retaps Bonds
The North American Development Bank (NADB), a lender 50% owned by Mexico’s government, has emerged to retap its 2022 bonds for $180m. Starting on the back of some $100m in reverse inquiry, the supranational drew approximately $300m in orders and boosted the outstanding size of the bond to $430m. The 2.40% coupon note reopened at 101.363 to yield 2.245%, or UST+62bp, inside of UST+65bp initial price talk. The 2022 had been quoted at UST+60bp in the secondary, according to sources following the sale, indicating 2bp concession. In a separate transaction Monday, NADB also priced a $50m 18-year bond at par to yield 3.00%. BNP Paribas and Bank of America Merrill Lynch managed the reopening, while BNP handled the smaller transaction. The bonds are rated AAA/AA+. The San Antonio, Texas-based NADB was created by the United States and Mexico, under NAFTA, with the US government owning 50%.
Correction: Mexican Pepsi Bottler to Sell Shares
A December 7 Daily Brief titled “Mexican Pepsi Bottler to Sell Shares” incorrectly identified an equity offering from Grupo Embotelladoras Unidas (Cultiba). It is a follow-on.