Moody’s has raised the outlook for Minerva’s B2 credit rating to positive from stable, it says. “We expect that the company will continue its deleveraging process and improve free cash flow generation over the next several quarters,” the agency says. The Brazilian meatpacker will be helped by favorable fundamentals for the beef segment in Brazil, mainly related to the cattle herd expansion that translates into lower cattle prices in the country. The agency also notes a “very comfortable” liquidity profile, following a $450m bond issuance earlier this year, with a BRL818.5m ($403m) cash position enough to cover short term debt until 2018.
Category: Paywall
Posted inDaily Brief
Paraguay to Engage Buyside
Paraguay is taking advantage of supportive market conditions to meet bond investors during a 2-day roadshow this week, according to investors familiar with the plans. The sovereign is scheduled to visit fixed-income accounts in New York Thursday and Boston Friday. Citi is managing the process. The sovereign has been aiming to return to the international bond markets, with government officials having told LatinFinance that an issue is a long-term goal, though the government is not in urgent need of funds. The government has also said it would also prefer to wait until receiving an investment-grade rating. Paraguay is rated B1/BB minus. The country’s banks have recently approached the bond markets. Banco Continental Paraguay priced a $200m 8.875% 2017 bond in June to some $450m in demand, though decided not to settle the deal after the impeachment of President Fernando Lugo worried the market. In 2011, BBVA Paraguay sold a $100m 3-year bond at a 9.75% yield. The region’s sovereigns have seen well-bid sales this month, with Colombia raising $559m-equivalent in peso-denominated bonds last week and Brazil selling $2.5bn in 2023 bonds. Also, Chile has registered a debt shelf of up to $1.7bn, according to the SEC, though there were no details regarding a specific upcoming transaction. Proceeds are earmarked for the sovereign’s general budget purposes. Chile last issued in the cross-border markets in September 2011, selling $1bn in 2021 bonds and $350m-equivalent in reopened peso-denominated 2020 bonds, through Deutsche Bank and HSBC.
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Pine Plots LF Offering
Brazil’s Banco Pine is preparing to issue BRL300m ($148m) in letras financieras (LF) in Brazil’s domestic debt market, it says. The issue comes under a BRL1bn program. It does not offer information regarding the timng of the sale, which awaits regulatory approval. BTG Pactual, Santander and Pine Investimentos are managing the sale. Pine is rated A+ on a national scale. The bank is also considering the sale of bonds in Chile’s domestic market, having met with investors and registered a UF6m ($282m) program of up to 10 years with JPMorgan and Celfin.
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Rule Change Seen Benefitting Mid-Size Banks
Measures announced by Brazil’s Central Bank lowering banks’ reserve requirements should benefit the country’s mid-sized banks, Barclays says. “In our view, this decision was taken by BCB to primarily make sure liquidity conditions remain intact for smaller banks post the announcement of the liquidation of Cruzeiro do Sul,” the shop says. The Central Bank is incentivizing Brazil’s large-cap banks to use funds freed up under the changes to direct resources to either buy loan portfolios or Letras Financeiras from smaller banks. SME-focused mid-sized banks such as ABC Brasil, Bicbanco and Daycoval should be the ultimate beneficiaries of these measures, Barclays says, given their sound credit risk profiles, allowing them to extend their funding terms at the same time as lowering funding costs. Banks in lending JVs with larger banks, such as BMG and Banco Votoratim could also benefit, either from the sale of a portion of their loan portfolios to their partners or from additional funding. Brazil’s Central Bank announced Friday a reduction in the additional reserve requirements for demand deposits – to 0% from 6% – and time deposits – to 11% from 12%. The measures are effective immediately and aim to add as much as BRL30bn ($14.78bn) of additional resources to the banking system.
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Equity Funds Gain Inflows
LatAm equity funds saw net inflows of $170m and EM equity funds saw net equity inflows of $447m during the week ended September 12, according to EPFR. In terms of performance, LatAm funds gained 3.59% during the week ended September 13, and are up 7.54% year-to-date, according to Lipper. EM funds rose 3.27% during the week, to bring them to a ytd gain of 11.05%. Global small and mid-cap funds rose 2.82% on the week, and have earned 14.95% ytd.
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IDB Lends $700m in Argentina
The Inter-American Development Bank (IDB) has agreed to provide $700m in funding to Argentine government programs, it says. A $500m, 24-year loan with a 6.5-year grace period and variable interest rate based on Libor will help fund improvements in the Norte Grande region, with a focus on water collection, treatment, and distribution, as well as the handling of sewage and storm water. The government will weigh in with $55m in counterpart funding. Meanwhile, a $200m, 25-year loan with a 5.5-year grace period and variable interest rate, paired with local financing of $66m, is set to support business projects and enable public-private consortia work. The development bank declines to offer additional details.
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ISA Considers Refi
Colombia’s ISA could look to refinance at least $300m of debt tied to its Peruvian operations through a transaction in the international markets, CFO Camilo Barco tells LatinFinance. He expects his company would generate substantial investor interest, based on a flight to quality mentality among buyers and the perception of ISA as a low-risk name in a popular sector. ISA, which operates in Brazil, Peru, Chile, Bolivia, Ecuador, Argentina and Central America, last issued bonds in December of last year. The $154m-equivalent sale included 12 and 30 year domestic notes.
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Lupatech Readies Share Auction
Lupatech is preparing to sell up to BRL439m ($217m) in new shares, as part of a BRL700m capitalization plan agreed earlier this year, it says, and will set a date for a public auction as soon as it receives regulatory approval. The maker of parts for the oil industry is offering 109.8m shares at BRL4.00 each, a price agreed in April by its major shareholders. Shareholders BNDESPar and Petros are obliged to subscribe BRL184m, as well as pick up any additional unsold shares in the auction in order to achieve a minimum BRL300m size. Banco Votorantim is managing the process.
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Mexichem Tops 75% in Tender
Mexichem has received acceptance from holders of $267m or 76.32% of its $350m outstanding 8.750% 2019 bonds, it says, in a tender offer closed last week. In addition, the chemicals producer has received the minimum consent needed to eliminate restrictive covenants. Mexichem offered holders $1,245 cash per $1,000 principal, which includes $30 for adopting proposed covenant amendments. The tender is funded by last week’s well-bid sale of 10 and 30-year bonds. The sale included $750m in 4.875% 2022 bonds priced at 5.000% yield and $400m in 6.750% 2042 bonds priced at par. Mexichem amassed about $17bn in total orders. Citi, HSBC, JPMorgan and Morgan Stanley led the tender offer and the last week’s bond sale. The quartet is also managing an equity follow-on transaction, expected to raise as much as $1bn, that is awaiting launch.
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Rossi Renegotiates Covenants
Rossi Residencial is in the process of renegotiating covenants with Brazilian Securities for one of its domestic debt issuances, it says. The bonds were sold entirely to Brazilian Securities in order to back a sale of Certificados de Recebiveis Imobiliarios (CRI) in Brazil’s domestic market. The Brazilian developer expects negotiations to proceed “without difficulty.” It adds that similar agreements have been reached with Bradesco, Caixa Economica Federal and BTG Pactual regarding covenants on other domestic bonds. It does not elaborate on the restrictions to be adjusted, but says the renegotiations will help “allow potential improvements to accounting practices.” Rossi is also preparing a private share subscription that could raise as much as BRL500m ($245m).