Scotiabank says it will seek approval from its board during its next shareholder meeting to invest about $100m in Peru for 2009 to strengthen its operations in the country. A source at the bank says the funds will come from dividends that will not be distributed to shareholders. He adds that specific investments have not been agreed upon yet, but that a part of the funds will be used to maintain a healthy level of reserves.
Category: Daily Brief
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El Salvador Gets IDB Infusion
The IDB has approved a $400m loan to El Salvador so the sovereign may increase the availability of credit to the private sector. The loan is for 5-years, including a 3-year grace period, and priced at 6-month Libor plus 400bp. The central bank will use the funds to purchase short-term portfolio receivables for working capital and trade financing, thereby providing local financial institutions with new short-term loans for working capital and trade credits.
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WB Approves $100m Loan for Panama
The World Bank has approved a $100m loan for Panama. The fixed-term loan is repayable in 25 years and has a grace period of 2 years. The transaction “will support institutional reform and key policies for lasting and equitable growth in Panama, such as fiscal discipline consolidation, accountability, and the modernization of public financial management,” says Laura Frigenti, World Bank director for Central America.
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EM Debt Funds Gain, Outflow Slows
EM debt funds are up 3.55% for the week ended December 18, Lipper data shows, while outflows have slowed. Year-to-date EM debt has lost 17.88%, making them it worst performer of all world income funds. For the week ended December 18, global income funds are up 3.27% and international income funds are up 4.84%. Year-to-date, global income funds are down 4.94% and international income funds are up 2.56%, Lipper data shows. EM bond funds posted net outflows of $69m in the third week of December, well below the $800m they have averaged during their 19 week losing run, EPFR Global says. “Outflows from emerging markets bond funds were a fraction of their recent average,” says the fund tracker. “Outflows from global bond funds have increased nearly 13-fold while EM bond funds have seen last year’s net inflows of $4.2bn swing to outflows in excess of $14bn,” it adds.
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LatAm Equity Funds Eke Out Rise
LatAm equity funds registered a 1.37% increase for the week ended December 18. However, the fund is still the biggest loser of all world equity funds year-to-date, with a 57.37% drop, Lipper data shows. For the week ended December 18, EM funds are ahead by 2.75% and global small and mid cap funds are up 3.52%. Year-to-date, EM funds are down 55.10% and global small and mid cap funds are down 46.66%, according to Lipper data. Dedicated regional equity funds posted modest outflows, says EPFR Global. The fund tracker predicts record outflows in the $4.5bn-$6bn range for 2008, versus a $10.2bn inflow the previous year.
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Moody’s Takes Shine off Voto, Gerdau, CSN
Moody’s has revised the outlook to stable from positive on Votorantim Participacoes, Gerdau and CSN. For Voto, the action reflects the sharply declined prices and demand for all commodities produced by the group in the recent months, although Moody’s expects the impact on revenues and cash flows will be partially offset by the recent devaluation of BRL. “While the cement operations in North America have been negatively affected by the sub-prime crisis since the second half of 2007, we expect the performance of the cement business in Brazil will remain fairly robust during the first half of 2009 supported by the existing construction backlog,” says the agency. “However, we expect a declining demand for cement in Brazil thereafter due to an anticipated slowdown in the construction activity partly from reduced credit availability.” Voto is rated Baa3. For Gerdau, Moody’s notes rapid deterioration in steel industry conditions globally and expectations for weakened debt protection metrics for Gerdau and Ameristeel over the near term. “The current downturn goes beyond typical cyclical downturns given the underlying severity of the distress in the global financial markets,” says Moody’s. Gerdau is rated Ba1. Steelmaker CSN’s Ba1 outlook was also cut to stable from positive.
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Colombia Rate Cut Larger than Expected
Colombia’s central bank has cut its monetary policy rate by 50bp to 9.50%, more than was expected by most economists, who forecast at most a 25bp cut. The central bank says it expects inflation to drop to a range between 4.50% and 5.50% in 2009 from 7.73% registered in November. The central bank is expected to continue cutting rates in 2009 as inflation drops. Barclays economist Jimena Zuniga expects the rate to be eased by 200bp by August. “The central bank is likely to push the policy rate down to about 8.00%-9.00% likely by the end of 1Q2009,” says Goldman Sachs.
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BofA Names London-Based LatAm Head
Bank of America has given Jonathan Moulds – its existing president of Europe, EMEA and Asia – regional responsibility for LatAm and Canada. He will also be president of EMEA and be based in London, reporting to John Thain, president of global banking, securities and wealth management, once the merger with Merrill goes through. Merrill’s LatAm and Canada chief James Quigley will remain the operating head of LatAm, a Merrill spokeswoman says. He will report to Moulds. The BofA-Merrill deal is expected to go through in January and LatAm bankers are competing shops are eagerly awaiting news of the shop’s post-merger regional strategy.
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CAF Monitors Bond Opportunity
Caracas-based multilateral CAF says it is sitting pretty for funding and in no hurry to come back to the bond market. “We’re not in a rush. We have very high liquidity and we are waiting for conditions to improve,” Gabriel Felpeto, CAF’s director of financial policies and international issues tells LatinFinance. CAF returned last week to Colombia’s local market with an oversubscribed bond issue at apparently attractive levels. It issued Tuesday COP245bn ($110m) total, split between an 11.25% of 2013 and an 11.79% of 2018. Pricing was equivalent to 65bp over TES, while other Triple As came recently at 100bp-120bp over TES and 65bp was in line with the target, he adds. “We didn’t have the need this year but we had the opportunity,” says Felpeto. The deal through BBVA was the debut from a COP1trn 3-year CAF program and the first from the multilateral since 2004. Felpeto adds that CAF is looking at tapping other local currency like Peru and Mexico, while also monitoring the USD market. CAF was hit last week with a negative outlook from S&P on its A+/A-1 rating amid concerns about exposure to Ecuador, which is in default, as well as Venezuela and Argentina. The multilateral is among the region’s highest rated borrowers and typically leads the way back for issuers when markets slam shut.
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Mexico Bags 32% of 2009 Needs
Mexico bagged 32% of next year’s debt service (capital plus interest) with last week’s blowout $2bn 10-year bond sale, according to the finance ministry. “Despite elevated international markets volatility, the government managed to place this benchmark bond at a cost close to the lowest achieved in the past for the same tenor,” says Hacienda. The Global 5.950% of 2019 priced at 99.784 to yield 5.980%, or 390bp over UST. Ministry data shows a UMS 10-year yielding 5.69% in September 2007, 5.74% in March 2006 and 8.66% in January 2001. According to the government, demand was $4bn and the deal was placed with 150 institutional investors, mainly in North America, Europe and Mexico. “This placement allowed the government to increase and diversify its investor base,” says Hacienda. The transaction was executed at just 40bp above the 2017 – according to the leads – versus expectations of at least a 50bp concession taking into account recent US high grade pricing. Bankers hope it paves the way to an active January for bond issuance.