Japan’s Marubeni and Chile’s Antofagasta are moving ahead with plans to assemble financing for a $2bn mining project in northern Chile. They are heard to have chosen to work directly with Japan’s three largest lenders – Bank of Tokyo Mitsubishi, Sumitomo Mitsui and Mizuho – to assemble the financing. The lead duo – partners in a mining project called La Esperanza – have hired Rothschild as lead advisor. People familiar with the process say as much as half of the project could be financed with equity, while the remaining debt portion would be raised with credit agencies and multilaterals on one side, and commercial banks on the other. The commercial tranche, which would be syndicated among international banks, would likely not top $500m, given today’s hostile bank market conditions. Yen loans from the lead lenders are also heard being considered. Timing for launch is still a ways off – it would not happen before the end of Q1, and possibly as late as the first half. In April, Marubeni bought 30% stakes in two of Antofagasta’s projects – Minera Esperanza and Minera el Tesoro. The new financing is directed at the former.
Category: Daily Brief
Venezuela to Cut Spending: Moody’s
Moody’s says that Venezuela’s strong external asset position will provide a cushion if the current drop in oil prices deepens, but it will have to significantly reduce spending if the downturn in oil prices becomes a long-term trend. Until now, says Moody’s, Venezuela has been spared of the global financial crisis since it has little dependence on external capital inflows given its large oil exports. However, the drop in oil prices, which have gone from $140 in June to under $55 this month, pose a challenge for the country’s fiscal and external accounts, which calls for a cut in public spending. Moody’s says that has announced a more austere budget for 2009 and will likely benefit from financial assets close to one-third of GDP, with provides short-term flexibility. Venezuela’s B2/B1 government bond ratings are supported by its sizable energy exports, Moody’s says, adding that it has had the country’s ratings on review for possible upgrade since September 19.
Cap Cana Seeks Creditor Settlement
Cap Cana appears to be seeking to avoid default on a loan that came due yesterday, though on what terms was unclear as of late Wednesday. No default notices were reported issued in regards to the Dominican borrower’s $100m bridge loan via Deutsche and Morgan Stanley. The facility matured yesterday and people with knowledge of the process say they believe creditors and the company’s advisor, New York-based Weston Group, are in discussions to work out a solution that involves a discount on the facility. The company said in a statement issued late Monday it had offered its creditors – understood to include 5 hedge funds and one larger institutional investor – alternatives to paying down the full amount, but that the offers were rejected. People away from the process say the initial offer involved a substantial haircut to initial value. Hedge funds and buysiders in general are less willing to enter talks that would suggest a loss of principal, since the industry is seeing substantial redemptions and portfolio losses, according to people away from the process. Cap Cana’s CFO Alex Hazoury was not available for comment.
Gener Approves Share Sale
Shareholders of Chilean power generator AES Gener have approved plans for a share offering of up to CLP153.56bn ($239m). As many as 945m units will be priced at CLP162.50 each, with existing shareholders having preferred rights. Timing is not specified. Proceeds will be used to finance investment in projects under its investment plan. AES Gener plans to raise installed capacity to 5,000MW by 2011, from 3,600. Earlier this month, majority shareholder Inversiones Cachagua raised $175m from the sale of a 9.55% stake in AES Gener through a secondary sale to raise funds to participate in the new offer. Celfin is managing the transaction.
Brazil to Lend BRL500m to Farmers
Brazil’s central bank has approved plans to lend up to BRL500m to farmers through development bank BNDES. The lines of credit will be available to famers in the center-west region of the country to refinance up to 40% of debt maturing in 2008. The funds come with a maturity of 1-3 years, at rates ranging from 7.00% to 10.25% per year.
Citi Loses Mexico Loans Director
Carlos Corona, a director in Citi’s combined debt group, has left the firm as part of a round of layoffs earlier this week. Loans expert Corona was one of four execution bankers for LatAm at Citi, focused on Mexican clients. He worked on deals for CFE and Pemex in the past year. People close to the firm says his departure marks a loss for the group. No other mid-level or senior bankers were let go. Citi has conducted several rounds of layoffs at all levels of seniority this year and the next is set to take place in January. It has announced 52,000 redundancies globally.
Metrofinanciera Defers Perp Payments
Fitch has downgraded to C from CCC minus the $100m 11.25% perpetual subordinated step-up notes issued by Mexican mortgage company Metrofinanciera. The action follows the deferral of a $2.8m coupon payment due Tuesday. The coupons of the perpetual bonds are deferrable when Metrofinanciera’s risk-weighted capital ratio stands below 8%. Such an action is not considered a default at the company level, Fitch says, leaving it to affirm Metrofinanciera’s B+ global and BBB national scale ratings. The recovery rating on the perpetual bonds remains at 6, the agency’s lowest. “Recovery expectations are limited in view of the subordinated nature of this issue and the uncertainty over the foreseeable future on Metrofinanciera’s ability to improve its financial condition while reducing its reliance on external support,” Fitch says.
T&T Chops GDP Outlook
The central bank of Trinidad & Tobago slashed its real 2008 GDP growth forecast to 3.5% from 5.6%. It also lowered expectations for 2009 to 2.0% from 5.0%, mainly because of the drop in oil prices. Since energy revenues made up 64% of total government revenues in 2007, JPMorgan and, separately, an IMF mission that visited the Caribbean nation, say they believe the government should cut spending. JPMorgan says the government is expected to announce this week a review of its $7.8bn 2009 budget, which assumes an average price of $70 per barrel of oil and $4 per million BTU for natural gas. The IMF mission says that it is encouraged by the government’s intentions of adjusting fiscal spending in the face of lower energy prices. It also recommends maintaining nominal spending at its fiscal year 2007-08 level, which would translate into spending reductions of some TTD3bn.
IDB Lends $20m to Nicaragua
The IDB has approved a $20m loan to Nicaragua. The loan includes a $10m financing for a 30-year term at a 5.5-year grace period at a variable interest rate and a $10m financing from the fund for special operations for a 40-year term and grace period at an interest rate of 0.25%. Nicaragua’s Ministry of Agriculture and Forestry will carry out the program, which aims to improve the skills and access to technology of farmers.
Fitch Downgrades Jamaica’s CAP
Fitch has downgraded Clarendon Alumina Production, which the government of Jamaica owns, to B minus from B. It also revised the outlook to negative from stable. The cuts follow the downgrade of the sovereign by Fitch to B with negative outlook, Fitch says. “CAP ended the financial year with a negative $34.7m operating Ebitda position, primarily a reflection of high production costs in relation to caustic soda and fuel inputs and CAP’s inability to pass them through to end customers, largely due to inflexible long-term supply contracts with its main customer Glencore, ending 2010 and 2012 respectively. As a result of these long-term contracts, CAP was unable to benefit from the high spot prices seen for alumina during the last two years,” Fitch explains.