America Movil’s full draw on $2bn in bank credit facilities in Q3 and decision to use cash to repurchase MXP17.4bn in shares have weekend its liquidity position, says Moody’s, which cut the outlook on its A3 rating to stable from positive. The move will make it more challenging for the Mexican mobile phone operator to cover its MXP20bn commercial paper programs, of which it now has MXP6.5bn outstanding. Moody’s also revised expectations regarding America Movil’s “ability to increase margins and improve credit metrics in 2009, due to the likely impact of a more adverse economic environment on its pre-paid subscriber base,” it says.
Category: Daily Brief
Posted inDaily Brief
Moody’s Detects AmBev Strains
Moody’s has cut its outlook for AmBev to stable from positive, reflecting increased pressure on margins, increased dividend payments and lower free cash flow, and an environment of restricted or more expensive financing. AmBev’s cash flow from operations minus capex amounts to BRL4.5bn on an last-12-months basis, which, when combined with cash and cash equivalents of BRL2bn, would be sufficient to cover AmBev’s current portion of long term debt of BRL2.43bn and could also cover other short term debt maturities of BRL1.61bn, which are composed of revolving credit lines that are normally renewed. However, AmBev has historically maintained a high level of payout to investors, which amounted to BRL4.6bn – including share buybacks and dividends – for the 12 months ending September 30, Moody’s says. The agency also affirms the Baa3 foreign currency issuer rating.
Posted inDaily Brief
Fitch Sees High JBS Leverage
Fitch has assigned a B+ to Brazilian beef producer JBS, it says. The agency based its ratings on JBS’ strong competitive position and high liquidity, but also cyclical risks, high leverage and aggressive growth strategy. Fitch expects the credit ratings to strengthen as it begins to consolidate the acquisitions of Tasman and Smithfield beef made earlier this year. The outlook is stable. Moody’s rates JBS an equivalent B1, and Standard & Poor’s B+.
Posted inDaily Brief
Subscriber Notice
Because of Thanksgiving holidays in the US, this will be the last Daily Brief until December 1.
Posted inDaily Brief
Ecuador Bottler Caps Sale to Group
Coca Cola del Ecuador, a local bottler formerly known as Ecuador Bottling Company (EBC), has sold itself to a local investor group, ending months of wrangling between its shareholders and outside suitors, say people familiar with the deal. The Correa Group – already a majority shareholder in the company with around 51% of the shares – is understood to have acquired a 34.5% stake in EBC for over $64m, leaving it with a combined stake of close to 85%. The private group is heard to have used its own cash to pay for the stake, which belonged to another shareholder in EBC called Nobis Group. Nobis originally sought a sale to Chile’s Kopolar. However, Correa Group had right of first refusal and reportedly considered legal action to bolster its claim to the stake. Earlier this year, Kopolar withdrew its bid for EBC in a filing. Ecuador’s Analytica Securities advised the sellers on the deal.
Posted inDaily Brief
BRMalls to Repurchase Perps
BRMalls has launched an offer to repurchase up to $30m of its 9.75% dollar-denominated perpetual bonds held outside of Brazil. The Brazilian shopping mall developer will hold a modified Dutch auction process where holders submit their minimum buyback considerations. BRMalls will pay $500-$600 per $1,000 tendered, it says, deriving the price through auction. It is also offering an early acceptance premium of $25 per $1,000 for offers before December 10. The transaction, managed by Citi, expires December 23. The bonds have been very illiquid, according to traders, with a price of 60 heard at one shop, in line with other LatAm perps. A banker on the transaction says the price range is designed to offer a premium to where the bonds have traded recently. BRMalls has $175m outstanding in the BB minus rated bonds, issued in November 2007 through Citi and UBS.
Posted inDaily Brief
Localiza Plots Another Share Buyback
Brazilian car-rental agency Localiza has announced a 1-year share buyback program of up to 5.86m, or 5.8%, of its outstanding shares, it says. It has also concluded early its previous 1-year program, which had been set to expire December 17, in which it bought back 4.22m out of a possible 4.50m units. Localiza shares closed Tuesday at BRL5.61.
Posted inDaily Brief
Xstrata Eyes $2.5bn Chile Mine Investment
Xstrata says the El Morro copper project in Chile may require a $2.5bn investment to take it to production. It also says the mine will have a life of 14 years plus 2-3 years for the construction phase and 5 years for the period of mine closure. Xstrata says El Morro has estimated mineral reserves of 450m tons with an ore grade of 0.58% copper. Xstrata Copper has a 70% stake in Minera El Morro, which owns the project. Vancouver-based New Gold owns the remaining 30%. The mine is still in the permitting phase.
Posted inDaily Brief
LatAm Leads Wilting EM Debt Trade
Trading in LatAm debt fell in Q3, according to an EMTA survey, but it still accounted for 39% of the EM total, the largest share for any region. “Trading in emerging markets debt instruments fell to its lowest levels in five and a half years during the third quarter of 2008,” says EMTA. LatAm’s total of $367.0bn traded in the quarter marks a drop of 24% from 2Q and 58% from 3Q2007. The region’s volume is also the lowest since the $351bn registered in Q1 1999, EMTA says. Brazil’s level of $203.8bn represents a fall of 16% from 2Q, but it remains the most traded debt in EM, with its 2040 Eurobond still the single most traded instrument at $17.2bn in flow. Argentina registered the fourth-highest EM volume in the quarter with $72.4bn. EM trading overall also fell, to $946bn in Q3, its lowest level since 2003, representing a 43% drop from a year ago, and 22% from Q2. Turnover in local markets instruments stood at $643.3bn, falling 46% from Q3 2007 and 22% from Q2. The $141.0bn traded in Brazil local instruments also led EM. EMTA’s survey includes data from 54 firms active in EM trading and investment.
Posted inDaily Brief
IDB Tightens Corporate Screws
Private sector companies and projects hoping to tap into IDB funds are more likely to be told no in the coming year as demand for the multilateral’s balance sheet soars. Faced with a substantial rise in requests from sovereigns, the IDB will be even more selective in evaluating projects, favoring those that meet stringent development criteria, says an official at the lender. Governments will likely have priority access, reducing the pool available to corporates. However, people at the institution note that the total budget will increase some 20% in 2009. “It’s going to be a complicated, ongoing allocation process in the coming year,” notes an IDB executive, who adds that there is no blanket rule or country limit to determine allocation. Among the IDB’s biggest clients in the region are Colombia, Peru, Brazil, Chile and Panama. IDB president Luis Alberto Moreno said this week that the multilateral will likely lend some $12bn in the coming year, with an additional $6bn coming from an emergency lending facility destined for sovereigns only. That is up from the $9bn-$10bn expected in 2008. The IDB’s private sector division, whose deals can account for no more than 10% of the IDB’s total loan exposure at any given point, approved $2.2bn in loans in 2007. The figure for 2008 is likely to have risen, say bank officials, who decline to specify volume. The IDB has played a major role in providing funds for projects and companies across the region. As needs rise and capital markets remain shut, a reduction in multilateral funds creates added woes for the private sector. Other multilaterals are expected to follow suit with a pullback from corporates, say bankers.