US-based Capital Gold has acquired Canada’s Nayarit Gold in a share swap worth $41m. The move has puzzled mining analysts who cover Capital Gold stocks. “I think they paid an expensive price for a puny asset,” says equities strategist Christopher Ecclestone at Hallgarten. “Nayarit’s resource is small and does nothing to move Capital Gold towards its goal of production of over 100,000 ounces per annum in the short term,” he adds. Adam Graf, director of equity research at New York shop Dahlman Rose, also questions why Capital would buy a much smaller miner instead of a peer with similar assets. He adds that the latter abound in northern Mexico, where both seller and buyer operate. Company information shows that while Capital Gold has inferred gold resources of 157,000 ounces, Nayarit only has 19,000. Nayarit does however have inferred silver resources of 552,894 ounces, while Capital Gold has none. Investors also appear to have questioned the deal, as the companies’ stock prices dropped on the day of the announcement, with Capital down about 0.4% and Nayarit’s off almost 4.0%. Capital Gold president John Brownlie was not available to comment on the criticism of the deal. However, earlier in the day he did tell LatinFinance that after the purchase is completed, the company will seek more acquisition opportunities in northern Mexico. Jennings Capital is Capital Gold’s financial advisor. Nayarit’s legal counsel is Peterson Law in Canada and Kavinoky Cook in the US.
Category: Daily Brief
Ausol Extends Restructuring Offer
Autopsitas del Sol has extended its debt exchange offer to March 3 from February 10, and notes it has received acceptance from holders of $98m, or 31.9% of its total $306m debt. The toll-road operator is looking to extend maturities in the restructuring, offering holders of 3.50% of 2014 bonds (which step up to 5.0% this year) and holders of 11.5% of 2017 bonds the choice of new 2015 peso denominated floating-rate bonds, new 2020 step-up notes, both in a par exchange, or $400 cash for $1,000 principal. Accepting holders choosing new bonds then also have the additional option of exchanging new notes obtained at par for new 2017 bonds at a 10% discount. Barclays is managing the process.
Pemex Revisits Swiss Investors
Pemex has continued its multi-market fundraising push with a reopening of its 3.5% of 2014 Swiss franc bonds for CHF150m. The notes originally sold in October were reopened at 101.751 to yield 3.086%, or mid-swaps plus 160bp. The transaction was heard driven by reverse inquiry from Swiss accounts. It priced about flat to secondary levels and the Mexican state-owned oil producer’s dollar curve, says a banker on the trade. Credit Suisse managed the deal. The original CHF350m sale priced to yield 3.525%, or mid-swaps plus 185bp. Pemex has raised $1bn from the dollar markets and MXP15bn from the local markets in the last month.
Mexico Focuses on MXP Benchmark Liquidity
Mexico’s government hopes to broaden its investor base with a new domestic debt sale mechanism designed to foster liquidity in new peso benchmarks. “It’s a good opportunity to promote the local markets domestically and abroad,” Gerardo Rodriguez, Mexico’s deputy undersecretary for public credit, tells LatinFinance. Mexico will place the debt in a similar fashion to its external bonds, ensuring critical mass at the outset that also make the bonds eligible for fixed income indices. Mexico is targeting the week of February 22 for the first sale. The debt syndication, as the process is known, will have its first test with a sale of 8% coupon 2020 bonds, which Rodriguez says should come at a size of MXP15bn-MXP25bn. In Q2, the 2020 will return to be sold through the normal method of smaller auctions, he says. A 30-year government bond should be sold via syndication in March. The plan is for the system to apply to all benchmarks, he says, though 20 and 40-year domestic bonds are not planned for this year. Mexico has named Santander, JPMorgan, Bank of America Merrill Lynch and BBVA Bancomer as managers, with Banamex, ING and HSBC co-managers. Under the current system of smaller regular auctions, the government says it takes about 4-6 months for domestic bonds to reach the MXP15bn-MXP20bn considered adequate for good secondary liquidity. Debt syndication is used in several European countries, including Spain, Italy and the UK.
Vale CFO Mulls Bond/Loan Combo
Vale is likely to come to the capital markets to raise funds following a series of acquisitions totaling $5.6bn. CFO Fabio Barbosa tells LatinFinance that Vale enjoys an array of available options to help it finance the purchases, including cashflow, existing credit lines with development banks and export agencies, as well as the bond and loan markets. “We will explore potential market opportunities,” Barbosa says, referring chiefly to the bond market, but adding bank loans will also be considered. “We’ll do whatever is most interesting for the company,” he adds. The CFO acknowledges that the bond market appears to be accommodating at the moment. Barbosa says Vale has a proven track record of generating strong cashflow, and company reported an $11bn Q4 cash position. Such sizable liquidity may help make the case for a syndicated loan, which is prepayable. In 2008, Vale signed a $5bn credit agreement with Nexi and JBIC and obtained access to a BRL7.3bn line from the BNDES for its 2008-2012 capex program. Investment banks and lenders are heard aggressively pitching the company for a combination of bonds and loans. Vale, which has an average maturity of 9 years on its debt, almost all of which is in dollars, is focused on constantly extending tenor and lowering average cost of capital. Its leverage stands at 2.5x. In between early January and last week, Vale announced acquisitions of stakes in Fosfertil and entities that hold stakes in the fertilizer operation, worth up $5.6bn.
Codelco Board Gets Revamp
Chile’s outgoing president Michelle Bachelet has named a new board of directors at state-owned copper producer Codelco. The new board, to be chaired by current board member Nicolas Majiluf, will take office March 1. It will be responsible for choosing a CEO to succeed Jose Pablo Arellano, who has said he will not continue beyond March. The board includes former national budget director Alberto Arenas, former Codelco CEO Marcos Lima, Andres Sanfuentes and Marcos Buchi. Arenas, Sanfuentes and Majiluf will be on the board until May 11 this year, while Lima and Buchi will remain there until May 2011.
Chile Rates to Stay Put
Chile’s central bank is seen keeping its monetary policy rate at 0.5% today and is not expected to hike it until at least 2Q, say Morgan Stanley and Barclays, in line with market consensus. “Although the central bank is likely to maintain the language regarding the stability of the policy rate at 0.5% until ‘at least Q2,’ it will probably at least highlight the recent peso depreciation in the accompanying statement,” Barclays says. The CLP has depreciated to CLP550 per USD on February 10 from CLP535 per USD February 1. Morgan Stanley believes that the ongoing economic recovery remains on track and broadly in line with the central bank’s base scenario. Although base effects should push annual inflation into positive territory as early as this month, it says price pressures remain largely muted. It forecasts annual inflation will reach 2.6% by the end of 2010, from a contraction of 1.4% at the end of 2009.
Moody’s Cuts Industrial Sub Debt
Moody’s has lowered Banco Industrial’s foreign currency subordinated debt rating to B1 from Ba3. The outlook is stable. The action affects $35m on non-cumulative step-up Tier 1 capital notes issued by the Guatemalan bank. Moody’s explains that key features of the notes driving the rating outcome are a 60-year maturity, non-cumulative coupon skip mechanism, and deep subordination in liquidation. Coupon skip features include optional and mandatory cancellation of interest, the latter based on regulatory triggers. In the event of Industrial’s bankruptcy, liquidation, or dissolution under Guatemalan law, the notes will rank junior to all senior and subordinated debt, pari passu with the most junior subordinated debt and preferred stock, and senior only in priority to holders of common stock. All other Industrial ratings are unaffected by the downgrade, which is the result of a review initiated November 18. As of December 31, Industrial was the largest bank in Guatemala, with $5.5bn in assets and $490m in equity.
Alto Parana on CreditWatch Negative
S&P has put Argentine forest company Alto Parana’s BB minus rating on credit watch with negative implications after tax authority Tribunal Fiscal de la Nacion (TFN) notified it of an adverse ruling on a tax claim. The total amount of the claim, regarding certain income tax deductions on a 2001 bond issuance is about $110m including principal, interest, and penalties, says S&P. The company made no provision for this claim in its financial statements and has announced that it will appeal. Nevertheless, S&P says it is likely that Alto Parana will have to pay about $80m, including principal and interest, before the courts determine whether the appeal is valid. Such a payment could hurt the company’s liquidity and stand-alone credit quality, say the agency. Alto Parana is a subsidiary of Celulosa Arauco y Constitucion.
Mercatto Launching Offshore Funds
Brazil-based asset management firm Mercatto Investimentos is launching 2 offshore funds this year. One is focused on investing in equity listed on the BM&F Bovespa, and the other, macro fund, will invest in equity, foreign currency and derivatives, managing partner Thomas Tosta de Sa tells LatinFinance. He declines to state how much the shop expects to manage under the 2 funds. He adds that the funds will only be open to investors outside Brazil. Mercatto already has an equity fund and a macro fund in which Brazilian investors can invest, which were established in 1998. The equity fund has BRL154.6m in net assets and the macro BRL77.9m, according to company information. Mercatto has more than $1.5bn in total assets under management.