Pemex has reemerged with plans for a domestic bond issue, and is set to sell up to MXP10bn ($739m) with pricing expected today, say bankers managing the deal. The Mexican state-owned petroleum company is giving the domestic market another try after postponing the multi-tranche deal earlier this month, that was to be up to MXP15bn. Today, Pemex is set to choose among 7-year floating-rate and 15-year UDI denominated bonds. “Because of market conditions Pemex has decided not to issue fixed-rate bonds,” according to a banker on the deal. Proceeds from the issue, rated AAA on a national scale, are to be used for investment purposes and to address existing debt. HSBC and Santander are managing the deal, which originally had four banks on it. Pemex last came to the local market when it issued MXP 10bn in 5-year bonds earlier this year.
Category: Daily Brief
Santander Chile Plans Subordinated Bond
Santander Chile has filed a shelf for up to UF4m in 30-year subordinated bonds, it says. The bullet-maturity notes would pay a coupon of 3.9% and are rated AA on a national scale. There is no information available as to the timing of issuance under the program. Santander would manage the transaction. Chile’s bond market has remained active in recent weeks, with a few more issuers still in the pipeline. Electricity transmission company Saesa , food products producer Agrosuper and Banco Falabella are all expected by the end of October, though none has set a date yet, bankers say.
Kiwi Uruguay Dairy Farmer Seeks Equity
NZ Farming Systems Uruguay, the New Zealand-registered Uruguayan dairy farmer, is planning to raise $120m via an equity rights offering. With an $85m loan from Olam, the Singapore-based agricultural firm which owns 86% of NZ, due in December, NZ says it must raise the equity or upsize the facility to $110m and extend its term. The matter will be put to a shareholder vote November 4. Olam has indicated it would exercise its rights in the sale, to be priced at $0.70 per share. Olam had offered minority holders this price in April when it sought and failed to take its ownership above the 90% threshold needed to delist NZ.
LatAm, EM Equity Funds Continue to Leak
LatAm equity funds recorded outflows of $240m in the week ended September 21, while $1.4bn left all EM equity funds, according to EPFR Global. During the week ended September 22, LatAm funds lost 13.25%, according to Lipper data. Losses on the year total 27.07%. The same was true for EM equity funds, which lost 10.07% for the week, and are down 22.85% on the year. Global small and mid-cap funds lost 8.10% on the week and have lost 16.69% ytd.
Panama SWF Law Expected Next Year
The Panamanian government hopes to pass a law approving a new sovereign wealth fund by the first semester of next year, Mahesh C. Khemlani, the country’s deputy minister of finance, told LatinFinance on the sidelines of the IMF meetings in Washington. The idea is to put any excess dividends from the Canal and other government projects into the fund, which could reach around $7bn in size by 2020, he added. The fund will act as savings for future generations and as a stability mechanism should the country, for example, suffer from fiscal imbalances. “This will reduce our dependency on debt,” he adds. The Panama Canal produces dividends equivalent to 3% of GDP, or around $1bn a year, and that could reach $5bn a year by 2025, Khemlani adds. The country has also discovered oil and has the largest undeveloped copper reserves in the world, he adds. Asset allocations have yet to be decided, but Khemlani sees much of it being invested abroad.
Paraguay Eyes Market, But Will Wait
Paraguay still has a long-term goal of tapping the international capital markets, but must first resolve a court case involving a defaulted loan and will also likely wait until the country achieves an investment-grade rating, government officials told LatinFinance at the sidelines of the IMF meetings. A Swiss court has ruled that the nation must pay debt holders interest and principal on an $80m loan extended to a Paraguayan diplomat in the 1980s during the dictatorship of Alfredo Stroessner. The government cannot tap the bond markets “until we resolve that,” the official said. Besides, he added, the country is in good fiscal shape and does not require the funds. Citigroup had been working with the government, but does not necessarily have the mandate for any upcoming issue, he said. The sovereign is still several notches below investment-grade, but was recently upgraded to BB- from B by S&P. This came on the back of increased fiscal flexibility thanks to the Brazilian government’s agreement to raise the country’s share of revenues generated from the Itaipu Dam. As a result, Paraguay’s revenues are expected to increase by 1.5% of GDP, allowing it to fund much needed-infrastructure. Earlier this year, BBVA Paraguay priced its $100m 3-year bond to yield 9.75% via Citi and BBVA, issuing what was thought to be one of the first cross-border dollar deals to emerge from the country. The Reg-S only transaction was rated Ba3.
Region Braces for More Volatility
LatAm countries and corporates are comfortably positioned to weather the volatility sweeping across the globe, but capital market activity will be slow to return given the overarching uncertainty, said bankers and government officials on the sidelines of the IMF meetings in Washington this weekend. Indeed the region has already started to feel the effects of such nervousness, with the Brazilian real and Mexican peso for the first time taking a considerable hit in recent days, and bonds spreads widening in response to higher risk aversion. “It is another indicator, another milestone in this process,” said a senior banker. “I do think we are going to have to look anew at LatAm issuance, which has been relatively resilient. It proves yet again that decoupling is just not a word worth thinking about.” All eyes are currently on Europe and whether governments there can follow through on promises and plans to contain the debt crisis in the Greece. “Hopefully the different measures that the Europeans are putting in place start filling some of the gaps,” said Alejandro Diaz de Leon, Mexico’s head of public credit. “The huge question is whether the measures …are enough that we don’t go into the abyss.” Still confidence in LatAm is largely high given how it has already been stress tested several times over the last decade or so. It is also a region that withstood the global turmoil in the wake of the Lehman collapse and saw economies rebound rapidly. “The one region that has experienced the most crises and is the most battle tested market has always been Latin America,” says Robert Abad, a senior analyst at Western Asset Management Co. (Wamco) “For anyone who is positioned defensively or for normalization, LatAm is where you want to be.” Despite that, bankers say market volatility will clearly have a spillover effect on economies across the region and weigh on capital markets and lending activity in the short-term. Bankers may have large pipelines but for now they are largely
Transelec Gets Private Placement
Chile’s Transelec has raised UF1.9m though a private bond placement, it says. The power transmission company’s 2032 bonds priced at 97.55 with a 4.05% coupon to yield 4.23%. Corpbanca managed the sale. The bonds represent the remainder of 2032 bonds authorized for a January sale, when Transelec raised UF1.5m of bonds priced to yield 4.24%. Transelec is rated A+ on a national scale.
Brazil Opportunistic On Bond Plans
Brazil is open to the idea of issuing bonds in either USD or BRL, but is under no pressure to access the market, says Fernando Garrido, public debt coordinator at Brazil’s ministry of finance. According to a London-based EM fund manager, the country has sufficient reserves and other liquidity cushions to keep it away from the external market for the next 2-3 years. “Brazil has low to nonexistent external financing needs, so our transactions have the objective of establishing liquid benchmarks in the international markets,” says Garrido. “Our current 10-year and 30-year benchmarks in the USD market are our global bonds maturating in 2021 and 2041, so these possibilities [for a retap] are always available.” If the sovereign were to come to market, it would almost certainly tap those bonds for an additional $1bn, bringing them closer to a benchmark size of $3bn each, the investor says. Brazil’s treasury secretary Arno Augustin said earlier this month that Brazil could potentially issue in USD or BRL though this depended on market conditions. “There’s no market to issue as everyone is selling,” says one EM debt analyst. “The global BRL sold off 100 basis points so there is clearly no market for it. With current market conditions issuers will have to wait on Europe and see how the crisis evolves.” As of Friday Brazil’s 2021s and 2041s were trading at 3.9% and 5.05% respectively on a yield basis.
Carvajal Increases Stake in Panamanian Packer
Colombia’s Carvajal International has reached 82.84% control of plastic packaging maker Sociedad Peruana de Moldeados (Pamolsa) for a total of $52.3m. It has bought the shares in the open market to increase its holding by 37.6%. The move follows a deal agreed in October 2010, in which Carvajal exchanged a 60% stake in Colombiana de Moldeados with investment firm Fama for a 37% stake in Pamolsa.