Fitch has put a $350m size on Grupo Elektra’s new RegS 7-year NC4 bond after rating it BB minus yesterday. This comes as the Mexican retailer wraps up roadshow today in New York, London and Hong Kong with investors heard discussing mid-to-high 7% pricing. Grupo Famsa, another Mexican retailer, is being seen as the main comp, with its $200m of 11% 2015 NC3s being quoted at around 8% area on Friday, though it has lower B/B+ ratings and a shorter tenor. Sister company TV Azteca, rated BB minus, is seen as another possible pricing gauge with its RegS only 7.50% 2018 trading Friday at 7.12%-6.92% Friday. As positives, Fitch cites the company’s strong market share, considerable brand recognition and its geographic diversification in both the retail and finance space though Banco Azteca. Debt to Ebitda on a consolidated basis for the last 12 months ending June 30, was 9.9x versus 10.0x last year, while with the standalone retail business it was above 2x, the agency says. Fitch sees this climbing to 2.5x by the end of 2011 due to additional financing to cover capex needs, including this issue. For 2011, capex will reach around MXP2bn, it adds. Leads on the issue are BCP, Jefferies and UBS. Elektra is tapping the international markets after an over 10-year absence. It last issued a foreign bond in 2000 when it priced a $275m 8-year NC4 at par to yield 12% through Warburg Dillon Read. At the time, the company was rated B2/B.
Category: Bonds
GrupoSura Pays up for ING Assets
Colombia’s Grupo de Inversiones Suramericana (GrupoSura) is paying a hefty price for ING’s insurance and other financial assets in Chile, Colombia, Mexico Uruguay and Peru, according to analysts that follow the company. GrupoSura agreed to acquire the assets for EUR2.68bn ($3.9bn), consisting of EUR65m in assumed debt and EUR2.615bn in cash. The deal values the assets at a 1.8x book value, or 18x estimated 2011 earnings on a GAAP basis. The deal comes at the high end of analyst expectations for the value of the operations, and at a significant premium to the 0.7x price-to-book ratio. “It’s an extremely good price,” says Jan Willem Weidama of ABN Amro, who says the consensus value for the assets was around EUR1.9bn. The deal excludes ING’s 36% stake in Brazilian insurer Sul America, which is valued for around EUR800m, around 2x book value. “Relative to our expectations it’s at the top end,” says a Europe-based equity investor. “They’re solid activities. They have leading market positions” in their respective countries. “If you get 1.8x…that seems very good,” says Dirk Peeters of KBC Securities “It’s a very good franchise. The growth expectations are simply higher in that region so that translates into a good price.” The transaction consists of mandatory pension and voluntary savings businesses, ING’s 80% stake in AFP Integra and 33.7% stake in InVita Seguros de Vida, including the company’s investment management capabilities in those countries. In May, Gruposura issued $300m in 2021 debut dollar bonds which it could use to help finance the acquisition. Gruposura says it is also hearing interest from international funds that may be interested in participating in the financing of the acquisition. Goldman Sachs managed the sale, while UBS and Bancolombia advised GrupoSura. GrupoSura’s shares closed COP36,000 on Monday, up from .the COP35,440 close on Friday.
LatAm Corporates Reduce Refinancing Risk
Liquidity and refinancing risk for Latin America corporates continues to improve thanks to stronger balance sheets, support from governments and development banks and stronger appetite for EM assets, according to a recent Moody’s report. Of the universe of Latin American companies covered by the ratings agency, 27%present a high refinancing risk, down from the 30% seen in April 2010 and a considerable drop from the 55% registered at the height of the financial crisis in March 2009, it said. This is partly due to corporates’ efforts to refinance debt and extend maturities at a time when investor appetite for EM corporates has grown. With the European and US debt crises threatening to derail markets at a moment’s notice, Moody’s says: “Prudent liquidity management with timely refinancing will continue to be a critical consideration for ratings in the region.” LatAm non-financial corporates face come $37bn in debt maturities during 2012 and another $43bn in 2013, though those amounts will increase as short-term debt due in 2011 will be rolled over into 2012 and 2013. Of the $142bn in debt maturing between 2011-2013, about $102bn comes from investment-grade issuers. Broken down by sector, the oil and gas industry faces the highest amount of debt maturities over this period ($33bn), followed by utilities ($26bn), metals and mining ($18bn), telecommunications ($18bn) and food ($13bn), the agency says.
EM Bond Inflows Keep Coming
EM bond funds took in $535m for the week ending July 20, according to EPFR Global. According to Lipper, EM debt fund inched higher by 0.72% for the week ending July 21, and are up 5.73% ytd. Meanwhile, global income funds climbed 0.32% for the week, to reach 4.43% growth ytd. International income funds rose 0.91%, bringing the ytd return to 5.57%.
La Construction Eyes July 28 Pricing Date
Chile’s Sociedad de Inversiones y Servicios de la Construccion has unveiled more details on its upcoming UF2.5m ($118.9m) 3 tranche domestic bond issue after filing a prospectus late last week. A pricing date has been set for July 28. The borrower plans to issue up to CLP54.8bn in a Series A tranche with a 6.8% coupon, a Series B tranche of up to UF2.5m paying a 3.2% coupon, and a Series C tranche of up to UF2.5m with a 3.6% coupon. Series A and B carry 5-year tenors and bullet payments. Series C has a 21-year tenor with a 10-year grace period. Celfin and IM Trust are managing the sale, rated AA/AA+ on a national scale. The issuer is an investment vehicle of a construction trade association called Camara Chilena de la Construccion. It holds stakes in the AFP Habitat pension fund, insurance companies Camara and Isapre Consalud, while also having holdings in clinic operator Red Salud and other companies.
Mexico Gets IDB Loan
Mexico’s Secretaria de Agricultura, Ganaderia, Desrollo rural, Pesca y Alimentacion (Sagarpa) will receive a $190m loan from regional development bank the IDB. The loan has a 25-year term, a 3-year grace period and a rate based on a Libor spread. According to the IDB, it will help finance productivity in the fish and fish-farming sector. The Mexican government will also kick in $74.4m for a total investment of $264.4m, benefiting around 5m agricultural producers. About $70m of the IDB loan will be dedicated to the control and eradication of agrofishing diseases.
Investors Talk Pricing On Elektra
Investors are heard seeking a 7%-8% yield on Mexican retailer Grupo Elektra’s new benchmark-size RegS 7-year NC4 bond. The buyside is taking Grupo Famsa, another Mexican retailer, as the principal comp, although its $200m of 11% 2015 NC3s carry a shorter tenor and are rated B/B+ by Fitch and S&P, a notch below Elektra. Those bonds were priced last year at 99.063 to yield 11.25%, but were trading Friday in the 8% area. Sister company TV Azteca, rated BB minus, is seen as another possible comp despite the difference in sector. The Mexican TV concern sold $300m of RegS only 2018 bonds earlier this year with a 7.50% coupon to yield 7.75% and the bonds were trading at 7.12%-6.92% Friday. Still, accounts have expressed some concerns about transparency on the Elektra deal given its RegS only format and a solitary BB rating by Fitch. The company is also part of the holdings of Ricardo Salinas who has courted his fair share of controversy in recent years after being investigated by the SEC and de-listing Grupo Azteca in the US. The borrower is continuing its global roadshow in New York, London, Singapore and Hong Kong early this week with leads BCP, Jefferies and UBS. Elektra is tapping the international markets after an over 10-year absence. It last issued a foreign bond in 2000 when it priced a $275m 8-year NC4 at par to yield 12% through Warburg Dillon Read. At the time, the company was rated B2/B.
Sanepar Places BNDES Credit
Companhia de Saneamento do Parana (Sanepar) has placed BRL395m ($252.23m) in debentures with Brazilian development bank BNDES as it moves to cover a BRL464m capex plan. The 2024 bonds are divided into three series. A BRL158m tranche pays the long-term interest rate TJLP+1.92%, and amortizes monthly from Sept 2014. A BRL118.5m tranche, meanwhile, pays the consumer price index IPCA+1.92% and amortizes annually from 2015. Proceeds will fund a plan to upgrade water treatment systems serving 99 cities, which is also being financed by BRL69m of Sanepar’s own resources. Sanepar is rated A3 on a national scale.
UVA Extends Roadshows
Brazilian sugar and ethanol producer Usina Vista Alegre (UVA) has extended roadshows by another day as it continues to move forward with a $150m-$200m 7-year NC4. The borrower had been expected to wrap up marketing in Los Angeles last Thursday but was still meeting with accounts as of late Friday. Preliminary guidance has been at 11% area, with pricing expected this week. However, some investors have voiced concerns over UVA’s 5.3x debt-to-Ebitdar ratio and tight liquidity. “There are other [EM credits] offering the same coupon with a cleaner balance sheet,” says a non-participating investor. The sugarcane grower/sugar and ethanol producer is rated B minus/B3 and is coming to market through BTG Pactual.
DomRep Builds $3bn Book
The Dominican Republic retapped its 7.50% 2021s for another $500m Thursday after the infrequent issuer saw its order book climb to $3bn in what was a positive day for the broader markets. Investors certainly liked what was seen as a 27bp concession after the release of low 7% area guidance, and they largely stayed on board even after the sovereign reduced that to a skinny 7bp when it launched at 6.95%. The B1/B +/B credit was heard favoring a tap of the 21s over the 27s simply because investor appetite was stronger at that part of the curve. “The deal was extremely strong,” notes Gregory Fischer, managing director at Oppenheimer. He says leads Barclays and JPMorgan picked the right day to bring DomRep given how optimism over US debt talks and news of a Greek bail-out plan sent markets higher Thursday. The 21s were trading at 104.60-105.10 in the secondary Thursday afternoon against a reopening price of 103.545. The sovereign was last in the market in May last year when it first issued the 2021s through Barclays and Citi, pricing them at par to yield 7.50%.