Category: Bonds

CAF has approved a $100m loan to Ecuador. The facility is a revolving credit line via Corporacion Financiera Nacional, an autonomous Ecuadorian financial institution. CAF executive president Enrique Garcia says such facilities are made available to shareholders to mitigate downside from the crisis. Funds will be channeled to Ecuador’s national development plan, he adds.

Remittances to LatAm and Caribbean countries are poised to see the first annual drop in a decade, says the IDB. “The break in the upward trend took place after the first semester of 2008. After a flat third quarter, in the fourth quarter remittances dropped to $17bn, 2% less than in the same period of 2007,” adds the multilateral. “For the few countries that have reported data for January, totals were down by as much as 13%,” it adds. Last year expatriates transferred some $69.2bn to their homelands, 0.9% more than in 2007, according to the IDB’s Multilateral Investment Fund, which adds that it is still too early to tell how much remittances could decline this year. The IDB says that in January alone, some countries reported remittances were down by as much as 13%. El Salvador’s remittances, for example, plummeted 11.9% in January, according to the government. They totaled $22.3bn in 2008. Mexico’s remittances, which total about $25.1bn, also dropped 11.9% in January, says Morgan Stanley. A decline in remittances is trouble for many countries that are heavily dependent on them to grow. For instance, based on government information, about 27% of Haiti’s GDP comes from remittances, as does 19.6% of Honduras’, 17.0% of El Salvador’s, and about 15% of Jamaica’s and Nicaragua’s.

The IDB has apparently taken a long-term view of its investment in CNAA, a major startup in Brazil’s sugar and ethanol sector. Despite a wave of negative news regarding some prominent companies in the sector, including one of CNAA’s main investors and former parent company SantelisaVale, the IDB has signed a long-term commitment. It joins energy private equity (PE) fund Carlyle-Riverstone in extending a $145m 15-year package for the company, many of whose peers are buckling under the weight of debt. The IDB agreed the CNAA loan at Libor plus 450bp last month. It marks a record tenor for the sector, and a rate that is barely above what some large 10-year project financings are now seeking. “It was very good of the IDB to take this long view with us,” a thankful Jair Steola, CNAA’s CFO, tells LatinFinance. Asked if the multilateral should have demanded a higher margin given today’s market, Steola says: “They’re view is probably that the market will eventually return to these levels.” An IDB official says the multilateral, which initiated the process in the first half of 2008, was reassured by Riverstone’s beefy equity commitment to the company following the cancelation of a planned B loan via BNP Paribas last year. Riverstone committed $275m in a 15-year hybrid loan at Libor plus 375bp, which can be converted by CNAA into equity starting in the coming months. The move substantially improves the company’s debt to equity ratio and bolstered the rationale for the IDB 15-year loan, says the multilateral executive. A 15-year tenor in today’s market is an anomaly, and almost makes for an equity-like commitment, says a Brazil-based syndications banker. He adds that there is no chance a commercial loan could be done at such a rate or tenor. BNDES may provide another BRL400m to CNAA, while the IDB may weigh in with an extra $80m for a third sugar mill.

The IDB has approved a $450m loan that will city-owned Empresas Publicas de Medellin (EPM) complete a cleanup of the Medellin River. The loan is for a 25-year term, with a 6-year grace period, at an interest rate based on Libor. The IDB says the financing will help cover construction of a second wastewater treatment plan. When completed in 2012, it will treat about 85% of all wastewater flowing into the river. EPM built the first treatment plant with financing from a $130m IDB loan in 2001.

The IDB expects to report a net investment loss of approximately $1bn on the portfolio for 2008. “The results were mostly unrealized and were recognized in compliance with mark-to-market accounting rules,” says the multilateral, adding that realized losses were $71m. “The results have not materially affected the Bank’s lending or operational capacity,” it adds. The multilateral says it upped loan and credit guarantee approvals by 18% last year to $11.2bn as the global crisis fueled demand for financing in LatAm and the Caribbean. Disbursements totaled $7.6bn, nearly $500m more than the previous year. Some $7.2bn of total approvals, or 64%, was for projects to improve competitiveness and quality of life. The IDB approved $2.4bn in financing for transportation and communication projects and close to $1.2bn in loans for water and sanitation, one of the IDB’s main initiatives. An additional $3.6bn supported projects in energy, capital markets, tourism and agricultural infrastructure, such as irrigation systems. Meanwhile, $3.3bn went to projects that included components to reduce poverty and enhance social equity. “A key set of projects focused on reducing the impact of rising food prices and the financial crisis through conditional cash transfer programs for the poor,” says the IDB. The remaining $707m financed projects to reform and modernize governments. The Bank supported, among other projects, efforts to improve fiscal management and strengthen financial systems. The IDB plans to strengthen its anti-cyclical role to help LatAm and the Caribbean weather the downturn. For 2009, it expects to have another record year of lending by frontloading approvals for key projects across the region. The IDB says it maintains a liquid investment portfolio that covers on average 18 months of loan disbursements, debt service and other liabilities.

Ashmore Investment and Colombian investment bank Inverlink have been picked to manage a $500m infrastructure fund created by the Colombian government, IDB and CAF. Macquarie Capital will join as technical advisor, according to CAF. The consortium was chosen from a group of 5 bidders. The fund will start operations by mid-year, prioritizing investments in sanitation, telecommunications, transport, logistics and energy. IDB and CAF may take a 25% stake in the fund, with the Colombian government and export bank Bancoldex taking the remaining 50%, Carolina Renteria, Colombia’s National Planning Director, tells LatinFinance. Loans to the fund are also under consideration. Renteria says the main goal is to help lure pension fund money to infrastructure and channel liquidity amid the crisis. The fund, a private equity vehicle subject to Colombian laws, seeks to replicate a model that has succeeded in Mexico and is central to the government’s plan to use infrastructure investment to mitigate the impact of global recession. His plan involves spending of $22.0bn this year in more than 100 infrastructure projects, of which $12.5bn is expected from private investors.

Mexico’s Sociedad Hipoteca Federal (SHF) is working on a return to the long-term debt markets, perhaps in the international markets, in order to meet its funding needs. “We are talking with the IDB about a guaranteed product to issue overseas,” says Pedro Guazo, CFO of SHF, adding that the target tenor would be 10-15 years. He adds that SHF will maintain its short-term debt auctions and raise medium-term funding to meet its needs. Guazo says SHF has not tapped the long term markets since 2005. Last year, before the crisis, it obtained a 25-year $2.5bn IDB loan at Libor flat, and a 30-year $1bn World Bank loan, also at Libor flat. Speaking on a panel at LatinFinance’s Cumbre Financiera Mexicana, he says SHF is also aiming to offer mortgage issuers with guarantees for construction bridge loans in the same way it does for RMBS issues, and hopes to have that ready in the next few months.