The bond market is not pricing in the upside of reforms that could lead to an opening up of Mexico’s Pemex, Scotia says, though major changes are not the bank’s base case scenario. “We are skeptical of recent campaign promises and our base case is that nothing happens. Nevertheless, the market is pricing zero probability of any reforms succeeding, which we think is too pessimistic,” Scotia says. Pemex, in the right environment, could trade at a yield equivalent to that of the sovereign, in contrast to its current yield differential of about 100bp over the sovereign, the shop says. The two leading candidates in Mexico’s July presidential elections have promised some form of privatization or reform at the state-owned oil company. In particular, leading candidate Enrique Pena Nieto, while shying away from a privatization, has promised to take action in his first year of office to open the firm to private investment. “Pemex needs a variety of reforms in order to raise capital, improve efficiency, and gain access to new technology. Just selling a minority interest in shares is neither sufficient nor paramount. We think there is more than one way to accomplish each objective, leaving the future administration room for creative solutions,” Scotia says.
Category: Bonds
Titularizadora Eyes Debut Cross-Border MBS
Colombian mortgage securitization specialist Titularizadora Colombiana is analyzing options to issue what would be a debut cross-border mortgage-backed security (MBS), president Alberto Gutierrez tells LatinFinance. “We suspended plans for a cross-border bond in 2007 due to the crisis, but we have restarted the process and could issue in 2013,” he says. The lender is considering the deal based on market opportunity to issue cross-border MBS deals, potential for attractive pricing, and access to international investors. “It is important to access the international market as a new source of MBS funding,” Gutierrez says. Titularizadora is considering transaction of at least $250m, but has yet to define a specific structure or tenor, and will decide between dollars and Colombian Pesos. Colombia’s liquid local market has allowed Titularizadora to maintain a consistent presence there, allowing for 4 issuances per year and a total of 37 transactions over the course of 10 years to amount to $9bn dollars total. So far this year, Titiularizadora has issued 2 of its 4 annual issuances, and plans to issue its next local bond, of $200-$250m-equivalent at10 years, in August. It also plans to securitize consumer and auto loans this year, opting for local transactions that amount to $80-$100m-equivalent, likely at 7-year tenors, as it seeks to take advantage of its MBS expertise and branch out to other areas of securitization.
Infonavit Talks Price
Mexican mortgage and social services entity Infonavit is looking to price its up to MXP1.97bn ($145m) UDI-denominated RMBS in line with levels seen on previous deals, Jorge Marquez Garcia, Infonavit’s Cedevis program manager, tells LatinFinance. Infonavit last priced a MXP3bn 28-year UDI-denominated RMBS at 4.6%. The government-backed entity plans a June 7 sale. Issued through Infonavit Total, the 28-year bond will be backed by mortgages in the Infonavit Total program targeted at middle and high-income borrowers. Banamex and BBVA Bancomer are managing the transaction.
LatAm Challenged to Boost Securitization
Despite recent successful deals in the region, challenges remain for LatAm issuers to fully exploit the potential for securitization transactions. Growing markets in Brazil and cross-border deals such as the recent $229m transaction from Peru’s EsSalud have boosted hopes, though caution from the buyside remains an obstacle. “Latin America is beginning in the securitization market. Everything is brand new and we need time to see what happens and how things develop. Complexity makes it hard to value spreads. Why should we buy a securitization with the same spread as a corporate bond and more complicated with embedded options that is not fairly valued?” says Jorge Unda, CIO at BBVA Asset Management. Issuers agree that for the moment, simplicity is the key. “We have to be clear about objectives. One has to be very neat, simple and sound. It is not easy, and sometimes it is hard to know if things were priced properly,” says Jerzy Skornya, senior finance manager at Mexico’s Infonavit. Covered bonds are one class generating optimism, despite Global Bank pulling what would have been the region’s first such deal earlier this month. “Covered bonds are coming when the time is right. In countries like Mexico there is need to expand the investor base to international markets and covered bonds is an instrument that would make it a little easier,” says Michael Morcom, head of LatAm agency and trust sales at Citi. “With growing interest from US international investors in local currency-denominated instruments, a covered bond with a payment profile that looks like a corporate bond makes it easy to hedge, and I do think the time is right for that,” he adds. With Latin America’s growing middle class and a need to provide to provide liquidity to the growing mortgage origination business and assure growth at an appropriate rate, covered bonds provide an attractive alternative to MBS given their outperformance during crisis periods. “Can we convince investors that this is a product that
OSX Considers FPSO Bond Return
Brazil’s OSX is evaluating funding options for its next floating production, storage and offload (FPSO) project, including another project bond, CEO Luis Eduardo Carneiro and IR official Daniela Castro tell LatinFinance. “With OSX-4 the intention is to work in a similar way to OSX-3, and in the second half of the year look at a bond like OSX-3,” Castro says. The planning is still preliminary, but it would look to raise about $600m in the US or Norwegian market, she says. The shipbuilder raised $500m in 9.25% 2015 bonds in March to fund OSX-3. The first 2 OSX FPSO platforms were financed in the loan market, but Castro says the high-yield bond market is deeper and more preferable. OSX has not begun considering options for OSX-5, she says. Norwegian shop Pareto Securities was global coordinator on the OSX-3 bond, and joint lead with DNB Market.
YPF Seeks Debt Waivers
Argentina’s YPF is pursuing waivers from creditors to avoid the accelerated repayment of more than $1bn in debt, it says. The recent nationalization of YPF by the Argentine government might constitute a default on about $1.6bn of its debt, which would trigger early repayment. “In case those waivers are not obtained and immediate repayment is required, the company could face short-term liquidity problems. However, management expects that in such case it could obtain financing from several sources, including the company’s operating cash flows and available credit lines,” YPF says. Additionally, YPF says it currently isn’t in compliance with New York Stock Exchange listing requirements regarding its audit committee, and could face the delisting of its ADS. Separately, Spain’s Repsol – whose 57% stake in YPF was reduced to 6% through the expropriation earlier this month – says is will sue Argentina in a US court, and seek arbitration through the World Bank’s International Centre for Settlement of Investment Disputes.
Argos Upsizes Local Bonds
Cementos Argos has issued COP700bn ($391m) in domestic bonds, exercising its option to upsize from COP500bn. The Colombian cement producer priced COP97bn in 2018 notes at IPC+3.80%, COP300bn in 2022 notes at IPC+4.24, and COP303bn in 2027 notes at IPC+4.50%. The issue saw demand of nearly COP1.1trn. Argos plans to use the funds to refinance liabilities and for working capital. Bancolombia led the sale, rated AA+ on a national scale.
Bancomer Gets Local Bonds
Mexico’s BBVA Bancomer has sold MXP2bn ($145m) in domestic bonds. The 2014 notes pay the TIIE+20bp, in line with TIIE+18bp-20bp expectations. The demand reached more than MXP4bn, according to a person familiar with the sale. Proceeds will be used to fund bank operations. BBVA Bancomer managed the sale, rated AAA on a national scale. BBVA previously visited the domestic bond market in June 2011, when it sold MXP3bn in 2014 notes.
Cemar Preps Debentures
Companhia Energetica de Maranhao (Cemar) is preparing to sell BRL280m ($140m) in debentures in Brazil’s domestic market, it says. The utility plans a 2018 paying the DI plus up to 1.8%, and an inflation-linked 2020 paying up to 6.5%. Proceeds would fund working capital and repay debt. The unit of Equatorial Energia does not name the banks for the rule 476 sale, and an investor relations official declines to comment.
Drugstore Targets Local Bonds
Brazil’s Pague Menos is planning to raise BRL260m ($130m) in the local bond market, it says. The drugstore’s 2016 debenture would pay the DI plus 1.19%. Proceeds are marked for working capital and improving the issuer’s debt profile. Banco do Brasil is managing the sale, done under the rule 476 restricted format.