JBS is planning to obtain up to BRL400m in CCBs, or bank credit certificates, according to Fitch, which rates the facility BBB+ on a national scale. The beef processor will use the funds for working capital, according to Fitch. CCBs function as a bank loan, and can be registered at Brazil’s clearing house Cetip to be reoffered to other bank lenders in the secondary. A JBS spokeswoman declines to comment on the financing and no further details about the loan were immediately available. JBS is struggling with liquidity after spending more than $700m on international acquisitions this year, and faces about $1.4bn in maturing debt over the next 12 months. With the international debt markets largely closed in the second half of 2008, Brazil’s largest borrowers have been turning to domestic facilities such as CCBs and promissory notes. Telemar obtained BRL4.3bn in 8-year CCBs in July from Banco do Brasil, paying DI plus 1.30%.
Category: Daily Brief
IFC Partitions Colombia Tollroad Concession
The IFC has decided to break up an up to $2bn concession for Colombia’s Ruta del Sol tollroad into three pieces to facilitate bidding and eventual financing for the landmark project. Worsening financing conditions, especially for cross border financing, are a significant contributor to the strategic shift for the project, being structured by the IFC’s local branch, say executives that plan on bidding. The Colombian government is now expected to contribute a majority of the capital and operational manpower to the first and most challenging portion of the road – the stretch between Bogota and La Dorada, which crosses mountain ranges and requires tunnels and elevated sections of road. According to one bidder’s estimates, the first section could consume as much as half of the total cost of the project, or somewhere around $1bn. The remaining 2 sections – the La Dorada-Magdalena and Magdalena-Santa Marta stretches – will be awarded to 2 winning consortia, which will be responsible for sourcing their own financing for the concessions. “I expect the funds will come from the local banks and pension funds,” says Mario Dib, CFO of Odinsa, which is considering a bid. Local pension funds have been working with regulators for over two years to set up a framework permitting them to invest in infrastructure projects, namely the Ruta del Sol. A local bond would be the likeliest vehicle to do so. The turmoil has also led to a delay in the release of the projects’ statistics and critical documents to bidders which was most recently expected by December. One bidder now says he expects them out by February. As a result of the delay, bidding consortiums have yet to be formalized. Local IFC officials did not return calls seeking comment.
Angamos Lenders Invoke Market Disruption
A $989m 17.5-year project loan for AES Gener’s Angamos mining project in northern Chile will see its first disbursement this Friday, say people close to the process. Lenders are understood to be invoking a market disruption clause that will shift the reference rate up from Libor to a yet undetermined and undisclosed level to reflect the cost of lending. Stringent liquidity conditions have raised banks’ costs of obtaining funding to something well over Libor, leading them to demand that borrowers compensate for this temporary spike. In the case of Angamos, at least 33% of the syndicate must invoke a market disruption clause for the reference rate to be renegotiated. Lenders then submit their cost of funds to the admin agents, which calculate an average funding cost, based on the submissions, excluding the highest and lowest figures. The average is then shown to the company, which presumably agrees to the new reference rate based on the calculations, which are kept secret from the rest of the syndicate and the market as a whole. The project loan is made up of 3 tranches: a $675m tranche backed by KEIC, the Korean export credit agency, pays Libor plus 150bp while the commercial and LC tranches – which total $314m – pay Libor plus 205bp-275bp. BNP Paribas and RBS led the transaction, with Calyon, SMBC, Deka, DZ HSBC and Fortis taking MLA tickets.
AES Benefits from Libor Tumble
AES Gener, sponsor for the Angamos mining project, says its all in cost of funding has not been adversely affected by a surge in funding costs and widening credit spreads. “Libor is down and spreads are going up,” says Tobey Collins, CFO of AES Gener in Santiago. “From an all-in cost perspective, we ended up better off,” she adds, declining to illustrate the claim with specific numbers. The company’s most recent financing is the $989m 17.5-year project loan for Angamos via BNP and RBS. A year ago, US 6-month Libor stood at 4.86% while last week it was quoted at 2.62%, according to Bankrate.com. Collins says AES Gener plans to swap the dollar loan into local currency using some of the banks that participated in the facility. She declines to comment on a change in the reference rate for the first disbursement of the loan. Globally, AES and its subsidiaries have $847m in debt due in 2009 and $1.51bn in 2010. As of September 30, its total liquidity stood at $5.64bn.
BlueBay Shuts EM Fund, Loses Outspoken PM
Simon Treacher, EM portfolio manager at BlueBay Asset Management has resigned following a breach of the fund’s valuation policies. Treacher managed the BlueBay Emerging Market Total Return Fund, which had shed 53% this year to November 21. The fund will be wound down, BlueBay says, without indicating timing. The management firm declines to give the proportion of LatAm assets in the fund, but Treacher told LatinFinance in April that $6.0bn of BlueBay’s $16.4bn under management was allocated to the region. The 20-year veteran of these markets and longstanding Ecuador bull said at the time he was increasing his position in the wayward Andean sovereign’s globals, which have since seen a significant decline after the government missed a coupon payment last month. The outspoken and sometimes foul-mouthed manager boasted at the end of 2006 that he had taken off his CDS protection because he was so confident of profiting from his Ecuador positions. “I’ve never held a defaulted asset,” Treacher told an EMTA panel 2 years ago, adding: “I’m very long Ecuador.” Among his better calls earlier this year were a reduction in Argentine bonds and a prediction that rapidly expanding Brazil meat producers were headed for trouble. BlueBay declines to elaborate on the specifics of the valuation breach, saying only it was unrelated to the winding down of the EM Total Return fund.
EEB Turns to Locals for Financing
Colombian energy company EEB is in talks to raise $400m in new debt in the local bank market. Astrid Martinez, CEO, says she is discussing with a group of banks raising a 3-year bullet bridge loan at an expected rate of DTF plus 450bp-500bp. She notes that the price will likely be some 50bp higher than what might have been achieved prior to September. In the next 2 years, the company will seek a longer-term takeout, likely with international banks. The new debt will finance 2 large gas pipeline projects in Colombia which require total investment of $600m. The remaining $200m for capex will come from EEB’s own coffers. The new debt will elevate the company’s leverage ratio to 3.12x from 2.28x, says Martinez, keeping the company comfortably within leverage limits. Bond covenants say leverage must remain below 4.50x. EEB had originally sought to raise $400m via an equity issue or the sale of a stake to a strategic partner, but those plans gave way to raising debt in the local market. TGI, the company’s subsidiary gas unit, does not have the capacity to raise more debt, says Martinez. EEB’s debt is comprised primarily of $750m in 2017 9.50% notes (TGI), and $610m in 2014 NC4 8.75% bonds, both issued in the second half of 2007. On Monday, Fitch reduced its outlook on the company’s BB rated debt to negative from stable.
Bolivia’s BMSC Mulls Cross-Border Expansion
Banco Mercantil Santa Cruz (BMSC), Bolivia’s biggest bank, says it is assessing the possibility of cross-border expansion, but that nothing is likely to be signed in the short term. “We’re going to continue investing in Bolivia and we might even explore some opportunities outside of Bolivia, but very very small and nothing that will ever jeopardize our Bolivia operation,” Darko Zuazo Batchelder, BMSC’s vice president, tells LatinFinance. “We’ve been offered a couple of things, one in Peru, one in Argentina,” he adds, saying that these offers of stakes in banks were rejected and that the idea of expansion is still at a very preliminary stage. “We’re looking for opportunities, but nothing has come up yet,” adds Alberto Valdes Andreatta, vice president of finance and international affairs at BMSC.
EEB Outlook Sours
Fitch has cut the outlook on EEB’s debt to negative from stable and affirmed the Colombian state-owned power company’s rating at BB. The move affects some $610m in 2014 senior unsecured notes. The company’s ability to reduce debt leverage in the medium term has weakened, says the shop, pointing to its aggressive growth strategy and unlikely possibility EEB will manage to IPO anytime soon. EEB’s $320m cash position as of September 30 will likely dwindle as it seeks to meet rising domestic demand for gas with new capital investments. “Depending on the size and timing of these potential capital investments, consolidated debt to Ebitda could increase by more than 1 time (x) to more than 4x, which may pressure credit quality,” says Fitch. In the 12 months ended September 30, consolidated debt to Ebitda ratio was 3.1x on $490m of Ebitda and $1.5bn in debt, it adds. In October 2007, EEB sold $610m in 7-year NC4 notes at par to yield 8.75% via ABN AMRO, now RBS. The notes were most recently quoted trading at 86.5-88.5.
Fitch Turns Negative on TGI, Affirms Telefonica
Fitch has affirmed TGI’s foreign and local currency issuer default ratings at BB and cut its outlook to negative from stable. The cut reflects the weakening prospects for Argentina’s TGI to reduce debt leverage over the near to medium term as originally expected, says Fitch. TGI has $750m of outstanding senior unsecured notes due 2017. Fitch says that TGI’s leverage level is 4.2x Ebitda of $215m. Elsewhere, Fitch says Telefonica Chile’s outlook is stable, citing strong liquidity position, cash flow and manageable debt maturity. The agency believes the company, which is 97% owned by Spain’s Telefonica, will generate cash flow of $100m to $150m over the next few years. It also expects total debt to Ebitda to remain stable at or below 2.0x. Fitch also affirmed the company’s local and foreign currency issuer default rating at BBB+.
BBVA Bancomer Readies Local Bonds
BBVA Bancomer wants to sell up to MXP3bn in 2020 bonds in the local market as soon as next week. The notes are rated AAA on a national scale, and will pay a coupon set to the TIIE interbank rate. Mexico’s largest bank is also shooting to raise up to MXP6.4bn in 2029 peso-denominated RMBS later this month, if market conditions are favorable. BBVA’s own capital markets unit is managing both transactions.