The IDB has inked a $50m 25-year loan to help restore Jamaica’s roads that were damaged by storms. The financing has a 5-year grace period, at a variable interest rate and will help rehabilitate vital portions of the primary road network, minimize the impact of future flooding on the road system and cut travel costs for road users.
Category: Bonds
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IDB Approves $400m for Panama Canal
The IDB has approved a loan of up to $400m for the Panama Canal expansion project. An IDB spokesperson would not disclose terms. The Panama Canal Authority plans to raise about $2.3bn in loans to finance the expansion, which has an estimated cost of $5.25bn. The remainder will be covered with cash flow generated by the operation of the canal. In September, the authority said financing offers from multilateral and development banks – including up to $500m from the IFC – exceeded the amount it plans to borrow, giving it the option of bypassing commercial banks at a time when they are largely shut down. Moody’s rates the authority A2.
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Jamaica Gets IDB Support
Jamaica will get $100m-$200m a year over the next 3 years, for a total $600m, from the IDB and could receive up to $1bn from the multilateral over 5 years, according to a local press report quoting finance minister Audley Shaw. “Let me remind you that this is 5% money; not 10%-12% money as it is on the international capital markets which is likely to get worse now because of the fallout that we are having,” says the minister, according to Sunday’s Jamaica Observer. JPMorgan notes that the cost is also significantly less than the 15%-16% alternatives in the domestic market. The shop adds that Jamaica needs to issue $250m in international debt markets to complete external financing needs for the current fiscal year. “Given the difficulty in raising external funds amid the global credit market seizure and steeply higher rates in the local debt market, increased multilateral funding should help alleviate some of the funding pressure on the sovereign,” says JPMorgan. Jamaica is one of the most highly indebted sovereigns in the region – and very vulnerable in the present environment – but it prides itself on not having restructured. The Observer report also suggests that Jamaica is working with the World Bank to obtain additional funds.
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Chile Rate Hike Predicted
Chile looks set to raise rates Thursday to stem inflation, but analysts are divided on the magnitude of the increase. Merrill Lynch says it will add 25bp to 8.50% at the Thursday meeting, while Goldman Sachs expects 25bp-50bp. “On one hand, actual and expected inflation remain pressured, and CLP weakness adds to the risk of expectation and wage contamination. On the other, the global backdrop has deteriorated markedly since the last meeting, raising the prospect that deflationary forces may shift the inflation outlook significantly for an open economy such as Chile’s,” says Merrill. The shop adds that its models point to the need for a 9.25% level, but expects Chile to get there gradually. “In our assessment, the odds of a 50bp versus a 25bp hike are pretty even,” says Goldman. “Another 50bp hike, rather than a 25bp, would certainly boost the central bank credibility as it would unequivocally reinforce the central bank commitment to bring inflation back in line with the 3.0% target over the usual horizon of monetary policy (18-24 months ahead),” it adds.
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LatAm DCM Revenue Down, Liquidity Risk Up
LatAm DCM revenue totaled $202m through the first nine months of 2008, according to Dealogic, representing a drop of 40% from the corresponding period of 2007. Tighter credit markets saw a 36% drop globally, to $11.4bn. Despite lower refinancing needs, tough borrowing conditions and reduced appetite from investors have increased risks related to liquidity, Moody’s says. “As long as the debt capital markets remain closed to the majority of issuers, funding needs and liquidity risk may have an increasingly important credit role over the coming quarters,” the agency states. It expects volatility and uncertainty to prevail over the next 6-12 months, with widening spreads and an unfavorable relative yield in comparison to other debt classes and regions continuing to undermine cross-border DCM access.
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Perfect Storm Bashes Remittances
Economic downturns in the US and Spain, inflation and a weaker dollar will cause a fall in money transfers from LatAm migrants for the first time this decade, according to the IDB’s MIF unit. Migrants from LatAm and the Caribbean will send some $67.5bn to their homelands in 2008, against $66.5bn in 2007, some 1.7% less year-on-year when adjusted for inflation. Until last year, remittances to the region had grown by double digits every year, says MIF, which says this is the first drop since it started tracking these flows in 2000. The new estimates are based on monthly and quarterly data from nine LatAm central banks in countries that receive about 88.5% of the remittances flowing to the region. Earlier this year the MIF had noted that remittances to Mexico, the leading destination of such transfers in LatAm, were no longer rising, while remittances to Brazil, the second biggest recipient, had dropped in 2007. “More recently, Guatemala and El Salvador have reported declines in remittance flows,” says MIF. Nonetheless, the volume of remittances to the region still outstrips all overseas development aid and FDI.
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BM&FBovespa to Buy Back Shares
Brazil’s main exchange, the BM&FBovespa, plans to buy back up to BRL641m of shares, some 3.5% of the total float. The entity’s stock price has fallen substantially over the past several months, and the board’s decision to buy appears to be a move to reaffirm management’s confidence in the stock. BM&FBovespa shares, which only began trading as a single entity on August 20, dropped 28% in September alone, according to Economatica. The shares close at BRL8.99 Thursday, up 5.76%. At those prices, the full buyback of 71.3m ordinary units would be worth BRL641m.The shares will be purchased through Bradesco’s Agora Senior, Credit Suisse, Itau, Morgan Stanley and UBS Pactual. The exchange’s market cap was BRL18.38bn Thursday.
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Sadia Loses BRL760m on FX Hedge
Sadia, the Brazilian poultry processor, has lost BRL760m through an FX hedge designed to protect parts of its business from fluctuation in BRL-USD. In a statement posted on the CVM website, Sadia says it unwound the position, which resulted in the recognition of the loss. The company says rapid depreciation of the BRL, which was unexpected, was the main reason for the misguided hedge. The BRL has weakened 18% versus the dollar since the beginning of August.
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Itau Snags ex-Deutsche DCM Specialist
Itau’s investment banking unit has added Doug Chen, formerly a director in the LatAm DCM department of Deutsche Bank, to its New York office this week. Chen left Deutsche last month after several years of originating LatAm bond transactions. Deutsche is heard to have no immediate plans to replace him.
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IDB Lends for Honduras Road Network
IDB will lend $20m to Honduras to improve road access to the city of San Pedro Sula, the multilateral says. The IDB financing includes a 30-year, $14m loan, with a 5.5-year grace period, at an adjustable interest rate, and a $6m 40-year concessional loan from the IDB fund for special operations, at a 0.25% rate. Local counterpart funds will total $2m. The ministry of public works, transportation and housing will carry out the program. The operation, in the context of a program for the integral improvement of the CA-5 Norte Highway, will expand and rehabilitate the Second Peripheral Ring Road between the northern headquarters of the Chamelecon river and the Gala intersection, to ease the congestion that occurs as the road cuts through the city, the multilateral says.