Cemex has received consent from a majority of its main bank lenders to amend or waive leverage covenants on some $12.2bn in syndicated loans and well over $3bn in bilateral facilities, say people involved in the discussions. This gives the troubled Mexican cement maker breathing room to further adjust terms on maturing debt and sell assets to raise cash without having to scramble to avoid tripping covenants. The company is also in the process of extending maturities on a handful of critical facilities, many of them bilateral, to work through a more orderly refashioning of its balance sheet in the coming year. The facilities to be amended are held at three different borrowing entities, says a banker on the deal. The holding company has a $700m 4-year revolver signed in June 2005 at Libor plus 45bp and a $1.2bn 5-year revolver done in the same month at Libor plus 50bp. The holdco also has a $500m bilat with BBVA inked in June. Cemex Espana had a $6bn Rinker acquisition facility with tenors of 3 and 5-years signed December 2006 at rates of 32.5bp-45.0bp over Libor; a $2.3bn 2, 3 and 5-year revolver signed September 2004 and amended a year later at 35.0bp to 42.5bp over Libor; and a €400m 5-year facility with a yen portion signed in March 2004 at Euribor plus 35.0bp and 57.5bp. And New Sunward, a separate holdco, has a $700m 2 and 4-year facility signed June 2005 at rates of 35bp and 42.5bp over Libor; and a $1.05bn 3-year facility. Credit date pricing for the above mentioned facilities comes from Dealogic. The banks leading the talks with Cemex on amendments and extensions are BBVA, Citi, HSBC, RBS and Santander.
Category: Daily Brief
Cap Cana Offers Bondholders New Security
Cap Cana, the high end Dominican real estate development, is offering some investors the chance to exit its 2013 9.625% notes, of which there is some $250m outstanding. The company and its financial advisor, New York based Weston Group, will today offer holders the opportunity to cash out of the security at 35 cents on the dollar. The notes were trading around 28 cents Tuesday, according to Weston. In the offer to repurchase the notes, Cap Cana says that it, a third party investor and the Weston Group, all three of whom are collectively offering to repurchase the notes, will accept a minimum of $50m in tendered notes and a maximum of $100m. The repurchase rate is 33.4 cents plus accrued interest, which adds up to 35.0 cents. “We want to cash out whoever needs to get out,” says John Liegey, CEO of the Weston Group. “If [investors] want to stay in the security, we would be ecstatic,” he adds. Cap Cana and Weston will later this week unveil a new security in exchange for the existing 2013s that has a 7-year maturity and a 10% coupon with 1.35% over-collateralization, says Liegey. The existing notes carry a collateralization of 1.25%, he adds. Holders of the new note would end up with an IRR of up to 12.00%, claims the advisor. Weston says its primary concern in this deal is the company’s bondholders and it wants to win their favor so as to be able to come back to the market in the future. “This company will not default on its bonds,” says Liegey. Cap Cana last month says it offered 6 lenders the opportunity to extend a $100m 1-year bridge but they instead chose a haircut of 40 cents, according to company officials.
CAF Returns to Colombia Debt
CAF has returned 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, Gabriel Felpeto, CAF’s director of financial policies and international issues tells LatinFinance. Other Triple As priced recently at 100bp-120bp over TES and 65bp was in line with the target, he adds. “We are very happy with the transaction given the environment,” says Felpeto, who adds that it was 2.4x subscribed. Some 50 investors participated, including pension funds, insurance companies, banks and asset managers. The deal through BBVA was the debut from a COP1trn 3-year CAF program and the first from the multilateral since 2004. This week’s issue was geared at boosting Colombia’s domestic market, but Felpeto says it was also attractive in terms of price, at just 5% equivalent coupon in dollars. “We were asked by the ministry of finance to issue in that market. They need some more issuers to help investors diversify,” says the official. The offer was not rated locally, but based on the international grading, the offer would have been a Triple A.
Argentine Beer Bonds Lose Fizz
Bonds from Argentine brewer Cerveceria y Malteria Quilmes have come off sharply over the last week, more because of Argentine risk in general than anything credit specific, according to analysts. Credit Suisse had the $120m 7.375% of March 2012 bid at 80 late last week, down 20% versus 100 the week before, and most other Argentine corporate bonds are quoted below 50. “Different refinancing options they had are really drying up due to the government’s nationalization of the pension system,” says Joe Bormann, corporate analyst at Fitch, speaking of Argentine corporates in general. Fitch, which rates Quilmes BB, put the beer maker and several other Argentina-based corporates on negative watch in late November, following news of the nationalization. Only a couple of Argentine names – in the energy and telecoms sectors – are trading above 80, Credit Suisse data shows. Analysts generally see the sovereign headed for disaster, with a negative impact inevitable for corporates.
Mexico Train Operator Upsizes HY Notes
Kansas City Southern has priced a $190m issue of senior notes due 2013 with a 13% coupon to yield 16.5%. The deal through Morgan Stanley was upsized from $175m. Proceeds and other borrowings will be used to repurchase $200m aggregate principal amount of its 7.5% senior notes due 2009. KCS has railroad investments in the US Mexico and Panama. International holdings include Kansas City Southern de Mexico, serving northeastern and central Mexico and the port cities of Lazaro Cardenas, Tampico and Veracruz, and a 50% interest in Panama Canal Railway Company, providing ocean-to-ocean freight and passenger service along the Panama Canal. KCS runs what it calls a NAFTA railway system, linking commercial and industrial centers of the US, Mexico and Canada. Settlement is scheduled for Thursday. Moody’s rates the notes B2 (stable).
Colombian Cowboys Go Public
A group of Colombian cattle ranch and agricultural land owners are close to pricing Colombia’s first IPO in a year. Medellin-based Fondo Ganadero (Fogansa) aims to finalize bookbuilding by Friday. The deal was 20% subscribed as of Tuesday. The offering is made up of 20m ordinary shares at COP2,000 per unit, to raise a total of COP40bn ($18m). Bancolombia is running the, the first from its sector in Colombia, according to bankers on it. Agricultural companies in Brazil and Argentina like SLC Agricola, Brasil Agro and Cresud have in recent years tapped equity markets for funds.
Cemex Pays up to Extend Loans
Mexico’s Cemex is paying a significant premium to term out as much as $4.7bn in loans by 1-2 years, following downgrade to junk amid looming nearby debt maturities. The refinance involves bilaterals and part of a 2006 Rinker acquisition facility. Bankers on the deal say the company hopes to close renegotiations by the end of the year, but will likely end up finalizing the process early in 2009, since credit committees are all but closed for calendar 2008. On the $6bn acquisition facility, Cemex is asking lenders to extend maturities for a portion of the B tranche with a value of $1.5bn-$2.0bn until December 2010, from a scheduled end-2009 due date. To get banks to term out 12 months, Cemex will boost total payback including margin and fees to Libor plus 200bp through 2009, and Libor plus 225bp-250bp through 2010, depending on ticket size and currency, from 40bp originally, according to a banker close to the talks. Cemex is also asking bilateral lenders at the holdco level to extend on up to $900m, while bilateral lenders to Cemex Espana are requested to refinance $1.8bn. Two new joint bilateral facilities (JBFs) – one for each borrowing entity – are being created so as to group bilats in a basket that includes different maturities and lenders. Both JBFs mature in February 2011 and carry rates equivalent to Libor plus 200bp-300bp. Most of the loans Cemex raised in 2004-2007 priced well beneath Libor+75bp. In general, the process is gaining positive momentum, though some banks are choosing not to extend and will be demanding timely payback, say people involved the deal. BBVA, Citi, HSBC, RBS and Santander are leading the refinancing.
S&P Predicts 0%-30% Ecuador Recovery
S&P has cut Ecuador to SD from CCC minus and predicts scant payback for investors still holding sovereign bonds. “The recovery rating on the global 2012s and global 2030s is 6, indicating the expectation for negligible (0%-10%) recovery in the event of a payment default,” says the agency. “The recovery rating on the global 2015s is 5, indicating the expectation for modest (10%-30%) recovery in the event of a payment default,” it adds. The downgrade follows the government’s decision not to pay $30.6m due on $510m in 2012s, which were chopped to D from C. The $650m in global 2015s fell to C from CC, while $2.7bn in global 2030s were unchanged at C. “We do not expect the government to make the next coupon payment of $135m on February 15, 2009, at which time we would revise the rating to D,” says S&P. The default by Ecuador is its second in less than 10 years and the second by a rated sovereign in 2008. S&P revised Seychelles to SD in August. S&P’s assessment is much more gloomy for investors than Fitch, which sees up to 50% payback from the 2015. It chopped the sovereign to RD from CCC, assigning 11%-30% recovery prospects to the 2012s and 2030s, 31%-50% on the 2015 and 51%-70% on pars and discounts. Fitch sees a bigger loss on the 2012s and 2030s since the government deems them “illegal” and “illegitimate.”
Other Sovereigns Unlikely to Follow Ecuador
Despite concerns that an Ecuador default sets a dangerous precedent for other sovereigns whose willingness rather that ability to pay is in question, analysts do not expect others to follow. “Investors will remain largely unconcerned about default risk in Brazil, Chile, Colombia, Mexico and Peru. Investors will likely continue to worry about Argentina and Venezuela, given their weaker institutional frameworks. However, we expect that both of these countries will continue to service their debt in 2009,” says Credit Suisse. It adds that Ecuador has been a LatAm trouble spot for a long time and is relatively small, with 1.3% of regional output and 2.5% of total population. “Collateral economic damage from the default should be small, as well as the demonstration effect, as most other countries in the region probably will not even consider the default route,” Credit Suisse adds. “No other Latin American country will follow the Ecuadorian default,” Barclays chimes in. Credit Suisse notes that defaulting LatAm governments have run into political difficulty and that not paying the debt could have negative implications for Correa’s reelection in April. Credit Suisse says some investors will likely try to take action against Ecuador in US courts, possibly also seeking to attach Ecuadorean assets abroad. Only 2015s have collective action clauses, which should complicate the restructuring process. Others are not so sure the impact is contained. “This default is significant because the country actually had the funds to make the payment but decided against it,” says Merrill Lynch. “The risk here is that other countries, such as Venezuela, may follow,” it adds.
Fitch Chops Venezuela to Single B
Fitch has downgraded Venezuela to B+ (stable) from BB- amid increased risk of financial and economic crisis due to a tenuous macro policy framework and concerns that a timely adjustment may not be forthcoming, particularly within the context of upcoming electoral events. “Electoral processes in 2009 and 2010 will deter the government from making difficult policy choices to address current macroeconomic imbalances,” says Fitch. It also highlights dependence on oil revenues, high inflation and an overvalued fixed exchange rate. Fitch expects Venezuela to revert to a net public external debtor in 2009, while most BB credits will remain net creditors. “In addition, the country’s international liquidity could fall below the BB median by 2010,” adds Fitch. However, it notes a comparatively low government debt burden and manageable government debt maturity profile, as well as an accumulated $18bn in liquid external financial assets in addition to international reserves of $38bn. “Government debt maturities, at 2% of GDP in 2008, are forecast to decline to less than 1% of GDP over our forecast horizon,” says Fitch.