Category: Bonds

The IDB and the BNDES are within months of issuing an RFP seeking financing proposals for a $9bn Brazil project, say executives involved in the process. The venture to construct a high-speed train between Sao Paulo and Rio de Janeiro has gained traction, despite a challenging financing environment and apparently no specific allocation for the project within the federal government’s national infrastructure plan. The most recent version of the rail plan is understood to have been set in motion by Italian engineering and infrastructure shop Italplan. Several global shops including Allstom, Mitsubishi, Siemens and Bombardier, are heard to have expressed interest in the concession. While a large portion of the financing is likely to come from the IDB, BNDES and likely other multilaterals, as well as ECAs, executives involved believe commercial banks will have to provide a significant chunk of the funding. The IDB and BNDES have hired Shearman & Sterling for legal counsel on the project.

CAF has sold COP240bn ($95m) in fixed-rate bonds on Colombia’s domestic market. The multilateral priced COP112bn in 2014 bonds at 9.60% and COP128bn in 2019s at 10.79%. Total demand exceeded COP300bn, according to bookrunners. The deal is CAF’s third placement in Colombia, and follows a COP240bn sale in December. BBVA managed the sale. CAF is rated A1 on a global scale. The Colombian debt market – LatAm’s most active local forum this year – awaits a COP200bn placement from power grid operator ISA today. The issue in 2 tranches worth some $80m with 6 and 9 year maturities, could grow to $100m equivalent and marks ISA’s first local tap since December. Correval, Citi and Bancolombia are leading that transaction.

The Central American Bank for Economic Integration (Cabei) plans to continue issuance in Taiwan, Costa Rica and Colombia as it meets 2009 funding needs of $500m. No decisions have been made, but Treasurer Jose Felix Magana tells LatinFinance the placements so far this year — $20m in Costa Rica, $107m in Colombia and $190m in Taiwan – have gone better than expected. “There was demand left behind, and we could execute in one or all of those markets again this year,” the official says. Magana adds there could also be more Honduras placement, after $5.5m last year, and the bank is evaluating a previously untapped market in both Asia and Latin America. “We’re trying to use our good credit to educate [issuers] about longer tenors and different types of products,” he says, noting that this is not limited to bonds. Cabei plans a $100m regional commercial paper program, with tenors of 30-360 days in new markets, for this year. It will also replace an existing CP program for US and European issuance with a $500m program by the end of April. Magana says Cabei has no need to place dollar bonds, though it does not rule out the possibility. The bank estimates it will lend $1.3bn this year, versus $1.6bn in 2008.

Multilateral support will be vital for LatAm, particularly if access to credit market remains constrained for several years, a study conducted by the IDB shows. “The region’s 7 biggest economies need to finance $400bn of maturing public debt in the next 2 years and may potentially need another $200bn to finance their growing budget deficits,” the IDB says. The study recommends the multilateral system should help countries achieve sustainable fiscal positions gradually while protecting social programs and enhancing productivity. In addition, it says multilateral institutions should shift their policies towards long-term financing from short-term emergency lending.

Korea’s Export-Import Bank and the IDB are signing an agreement to co-finance public and private sector projects worth as much as $2bn in the next three years in LatAm and the Caribbean. The banks will work together identify and finance projects in infrastructure, information technology, trade finance and other areas.

CAF has signed a $210m 7-year credit line for Banco Nacional de Panama. The bank will use the credit to provide medium-term loans, the CAF says. A CAF spokeswoman says the bank will draw on the line on an as-needed basis. She declines to state the rate.

A special commission recommended Sunday to the IDB that it lift funding to $230bn-$280bn from $100bn. The commission’s head, Pedro Pablo Kuczynski, called an IDB capital increase the central subject of this year’s annual meetings of the multilateral. “The urgency is that the possible alternatives, such as selling loans or guaranteeing the capital of some Latin American countries, all have downsides,” says Kuczynski, a former Peruvian finance minister. He adds that the proposed increase is not that large in relative terms. The committee’s recommendation starts the discussion, but the process is a “diplomatic dance” made more challenging by constraints on some donor countries facing slower growth and lower reserves. Kuczynski warns that the IDB will run up against limits this year, and the process to reach approval for such a capital raise could take as long as 2 years. The paid-in portion of the amount would be subject to negotiation, but if kept at current levels it would mean about $7bn, including about $2bn from the US. Kuczynski warns that alternative measures like selling loans to raise funds could be more costly in the long run. “The commission found that we should avoid financial engineering, not just because it’s the most discredited profession nowadays, but because we need to keep the AAA rating using a minimum amount of cash,” he says. The IDB has frontloaded available lending capacity and this year plans to approve up to $18bn, versus $11bn in 2008, up sharply from a 10-year trailing average of $5bn-$6bn, according to COO Dan Zelikow. “At this stage, we’re just asking for guidance. We’re not asking [shareholders] for a specific number, we haven’t recommended any particular number,” Zelikow tells LatinFinance, speaking of the capital increase.

Major IDB shareholder the US is backing calls to increase the size of the multilateral. “To help address the region’s demand for finance this year and next, we encourage the IDB to expand its existing resources, alongside the World Bank and the other regional development banks,” treasury secretary Tim Geithner told the IDB annual meetings in Medellin Sunday. “We believe there is additional room to expand your balance sheet and deploy additional resources to help governments in the region compensate for the sharp reduction in private finance,” he adds. According to Geithner, the IDB should set to work immediately to identify prudentially sound ways to further ramp up its lending in 2009 and 2010, reviewing its capital adequacy model and existing policies on lending limits. “Part of this effort must be directed at providing the poorest countries with crisis response tools. This is the most pressing immediate priority,” says the treasury secretary. The US is prepared to begin a formal review of the capital needs of the bank to assess the merit of an increase in the bank permanent capital base. Geithner adds that work on expanding private financing will be more critical in the months ahead. The secretary also stresses commitment to good governance, as well as ability to innovate.