Net private inflows to LatAm are expected to leap 30% this year to $176.5bn from $135.7bn in 2009, according to the Institute of International Finance (IIF). This includes $85.0bn net direct investment and $37.4bn from portfolios. “Net inflows of foreign direct investment should rebound from a depressed level in 2009 and net borrowing from banks should resume (in part driven by the recovery in trade flows),” says the IIF in a report on EM flows. It expects a slight reduction, to $172.5bn in 2011. The forecasts are included in an updated outlook on EM, including a prediction of $722bn flows overall, an upwards revision of $50bn since October and a 66% year-on-year rise. The IIF anticipates a major upswing from last year’s trough, describing it as the fourth such move in capital flows to EM since such investing came back into fashion in the middle of the 1970s. “It seems most likely that the bias of new flows will be towards large emerging economies with a significant scope to expand a domestic consumer market, especially Brazil, China and India,” says the IIF. The sell-side group expects 4.7% expansion in LatAm GDP this year, following a 2.3% contraction in 2009, and 3.7% growth in 2011. This is more than the global 3.2% and 2.9% GDP growth average expected this year and next, respectively. The IIF expects a 5.8% jump from Brazil this year and 4.0% expansion in 2011.
Category: Daily Brief
AIG Fund Manager Moves to Rohatyn
Claudia Arango, who was until recently senior vice president at AIG Capital Partners, has been appointed a senior member of The Rohatyn Group’s LatAm private equity practice. She joined the shop last week. The Rohatyn Group, based in New York, is a global asset management company focused on investing in EM.
Brazil Sticks on Rates, As Expected
As expected, Brazil’s central bank has kept its monetary policy rate on hold at 8.75%, but may begin tightening soon. “We believe that . . . Copom is preparing the markets for a tightening cycle in April,” says Goldman Sachs. The shop adds that Copom will raise the rate by 375bp to 12.50% this year. “The first hike would amount to 50bp in April, followed by 3 increases of 75bp per meeting, concluding with two final hikes of 50bp per meeting,” says Goldman. Bulltick meanwhile believes Brazil may tighten 150bp by the end of the year, starting in Q2. Standard Chartered sees a first hike of 50bp in March.
Jamaica Extends Exchange Deadline
Jamaica has extended the deadline for its JAD700bn ($7.86bn) domestic debt exchange. A new deadline and an indication of the acceptance rate were expected Wednesday, but had not been released as of the end of the day. The original deadline was January 26. “The government has received an overwhelmingly positive response to the offer, with substantially all institutional investors supporting the transaction,” finance minister Audley Shaw says. However, the government notes that local retail brokers have requested an extension. Also, Jamaica’s request for a $1.3bn 27-month standby agreement from the IMF will go to the IMF’s executive board Feb 3, and not this week, as initially expected. The IMF facility is seen as essential to mitigating possible secondary effects of the swap on the economy, such as FX pressure and liquidity at the island’s financial institutions. In the deal, local investors are being asked to voluntarily exchange non-treasury bill government bonds in a 1-for-1 swap for securities with longer tenors. Over 350 securities would be consolidated into 23 new benchmark bonds, according to Fitch. The maturity extension should be an average 2.5 years, according to RBS. Interest rates – which run as high as 28% on the existing bonds – should be lowered from an average of 18%-19% to 12%, RBS says. The government claims the operation will save JMD40bn annually in interest payments. Citi is managing the process.
Peru Goes Long in Local Issue
Peru has sold PES300m ($105m) in new 2042 domestic bonds, which the government claims are now the longest-dated local maturity in the region. The notes were auctioned at par and have a 6.85% coupon. Orders reached PES756m. The sovereign will use proceeds to finance public-sector investment projects being carried out by regional governments. “Investor reception to the offer of the government bonds reflects the confidence of the market in the solidity of the county’s macroeconomic fundamentals,” it adds.
Sabesp Goes For Bond Issue
Brazilian water utility Sabesp says its board has authorized a BRL900m non-convertible debenture issue in 2 tranches, one due in 2015 and the other in 2013. A BRL600m 2015 tranche will pay 3.50% over DI and a BRL300m 2013 tranche 2.25% over DI. Proceeds will be used to finance short-term debt, the company says.
Findeter Issuing Credit Deposit Notes
Colombian state-owned development finance agency Findeter is planning to issue COP225bn ($113m) in credit deposit notes in a Dutch auction. The notes, rated AAA, to be issued via the local stock exchange, will have tranches of 2, 3 and 5 years. Findeter will sell COP50bn in 2-year tranche, COP75bn in the 3-year tranche and COP100bn in the 5-year tranche. The 2 and 3-year tranches will pay a spread over DTF and the 5-year will pay a spread over IPC. Proceeds of the issue will be used to finance lending operations, says Fredy Vivas, a financial officer at Findeter, who adds that the agency is structuring and managing the operation itself.
Colinversiones Pursues Bancolombia Line
Colombia’s Colinversiones says it will begin negotiations with Bancolombia to obtain a 10-year COP650bn ($325m) loan to refinance its short-term debt and make it long-term. A company spokeswoman says interest rates are still to be negotiated. In addition, the energy-focused company is also considering issuing local bonds worth COP900bn to finance power plant developments.
Pemex Beats Local Path
Pemex is meeting investors in Mexico this week and next to pitch a new domestic bond transaction in fixed and floating tranches, according to bankers managing the sale. Pricing will happen as soon as the end of next week. The state-owned oil producer is expected to issue around MXP10bn, though it has filed for up to MXP15bn. It can choose between 5-year MXP-denominated floaters and 10-year fixed-rate notes in MXP or UDIs. Proceeds are marked for debt repayment, investment and general corporate purposes. BBVA, HSBC and Santander are managing the sale, rated AAA on a national scale. As with its pair of MXP10bn issuances in April and May of 2009, Pemex brings a big transaction that could help open up local DCM. This year however, supply scarcity has less to do with risk aversion and more with last year’s dispute between institutional investors and issuers that made it tough for all but the bluest-chip borrowers.
Aliansce Meets Tough IPO Crowd
Brazilian mall operator Aliansce succeeded in pricing its IPO Wednesday evening, though at a price well below what it originally sought. However, the deal is viewed as more of a success than a flop by both bankers and investors. “I liked this deal,” says an investor, who nonetheless declined to participate and says he will watch how it trades in the secondary. At BRL9.00 per share price Aliansce weighed in some 22% below the targeted midpoint of BRL11.50. Still, says the buysider, the EV/Ebitda ratio of around 11x 2011 earnings is in line with BR Malls and Multiplan’s multiples, and slightly below the 13x Iguatemi is trading at. The deal apparently struggled to price and had only 75% of its book filled by early Wednesday, according to an investor watching the process. A small group of committed investors helped maintain a bid, he adds. At BRL9.00, deal proceeds add up to BRL673m, including the sale of 24.8m secondary shares and 50.0m primary units. If it had priced at the midpoint of the targeted BRL10.00-BRL13.00 range, total proceeds including a hot issue and greenshoe, would have added up to BRL1bn. The deal’s leads have 30 days to exercise a greenshoe for 9.75m shares. The IPO was led by BTG Pactual, Itau BBA, JPMorgan and Bradesco BBI.