Brazilian power utility holding company Eletrobras will today launch syndication for a $450m B-loan, part of a $600m CAF A/B financing. Proceeds to the state-owned BBB minus credit are destined for capital expenditures. The 7-year B-loan carries a margin of Libor plus 150bp and amortizes in years 4-7. CAF, meanwhile, is lending Eletrobras $150m in 12-year funds — a significant tenor for a Brazilian borrower. The deal, joint led by Citi, BNP and SocGen, is being launched amid much fanfare despite the long tenor, and is heard already counting on MLA support from Natixis, ING, BBVA, Santander and Sumitomo, says a banker close to the process. “Going forward we will be doing a lot more lending in Brazil and Argentina,” a CAF official tells LatinFinance, referring recent commitments of $500m from each country to the development bank, to be disbursed over the next five years. Today’s deal marks the third time Eletrobras has tapped CAF for funds, the first loan having taken place in 2003, says the official. A second bank meeting in Sao Paulo is scheduled for Wednesday.
Category: Bonds
Cabei Approves Food Program
Cabei has established a $300m program to help offset a food crisis in Central America. The mechanism seeks to increase local production of food staples to cut the dependence on imported goods, the bank says. The program provides for a $50m line of credit to be distributed equally among the bank’s members, plus $40m for each country to establish a trust to help boost food production. The program also allocates $10m for a public-partner partnership in each country for infrastructure project. The bank has 5 member countries: Guatemala, El Salvador, Costa Rica, Honduras and Nicaragua.
HSBC Picks Up Capital Markets Pace
European heavyweight HSBC appears to be picking up the pace in LatAm capital markets, consolidating a top 5 DCM position in the year to June. The bank has done a slew of high profile trades for the likes of Pemex, Femsa, Infonavit and the Brazil sovereign to land at number 4 in the Dealogic league table through June 23, with close to $2.5bn in proceeds from 19 deals. That compares to fifth place a month earlier and ninth this time last year, when it had $1.2bn credit from 8 trades. The shop is heard with a decent short-term pipeline, including a sovereign bond, two corporates and a Samurai trade for a Mexican entity, understood to be the first LatAm name in that market since 2001. The balance sheet player is developing a niche in acquisition finance, with a handful of large Brazil and Mexican trades apparently on their way to market. HSBC is trying to convert a traditional senior lending role into revenues from M&A advisory, and it is expected to announce some senior hires in that department soon. “We are trying to finance transactions where we are going to get the full spectrum of the business and establish a long-term relationship with the client,” Gerardo Mato, co-head of global banking for the Americas at HSBC tells LatinFinance. LatAm equity remains slow for the bank, which is not in the Dealogic ECM top 10 for the LatAm year to date. But a bookrunner role on Vale’s upcoming $14bn transaction coordinated globally by Credit Suisse should help change that.
Mexican DCM Suffers Lack of Confidence
Mexico’s institutional investor base is flush with cash but a lack of confidence and heighted aversion to risk is keeping that money from flowing into the debt markets, according to local DCM bankers. Credit troubles in the US are largely to blame, say the bankers, who note plain vanilla deals are being chopped from the average MXP3bn size seen in 2007 to a MXP1.0bn-MXP1.5bn range this year. Structured finance deals are getting hit much worse, with number of deals being affected noticeably, say the executives. If conditions improve towards the end of the year, bond issue sizes might return to the sizes seen last year, says Gerardo Tietzsch, head of corporate finance at Ixe.
Banxico Seen Continuing Rate Hikes
Following last week’s surprise Mexican rate hike, which dragged down stocks, analysts anticipate further monetary tightening this year. Banxico raised the overnight rate by 25bp to 7.75% Friday, its first change since October. “We do not view this as the start of a long tightening cycle and we tend to think that the bank may require less of a tightening than the curve is currently pricing in (50bp in six months),” says Credit Suisse. Morgan Stanley meanwhile revised its prediction for the year-end rate to 8.00% from 7.50% previously. “Hiking interest rates in Mexico today is akin to buying fire insurance: the subsequent absence of a fire is hardly valid criticism of the decision to purchase insurance in the first place,” adds the shop, rejecting criticism of the move at a time of slower growth. Morgan Stanley also adjusted upward its Mexico inflation forecast for 2008 to 4.3% from 3.8% and for 2009 to 3.5% from 3.3%. Inflation has been on an upward trend since the start of the year, rising from 3.70% in January to 5.00% in May, mostly caused by the effect of high international prices for food and energy.
IDB Approves $58.5m Loan for Argentina
IDB has approved a $58.5m, 25 year adjustable interest rate loan to the province of Rio Negro in Argentina for an extended school day program to promote educational opportunities for primary school students from low-income families. The loan, guaranteed by the Argentine government, has a 5-year grace period. Local counterpart funds for the loan total $6.5m.
Chilean Rate Hikes on Horizon: JPMorgan
Chile’s Central bank will likely raise interest rates 50bp in July and 25bp in August, JPMorgan says in a research report, lifting the benchmark to 7.5% by the end of 2008. The shop attributes the expected moves to the 10.4% minimum wage increase, as well as a high CPI reading anticipated for June. It also lowered its 2009 GDP growth forecast to 3.50% from 3.75%, owed to the expected monetary tightening.
Antofagasta, Marubeni Seek Mining Financing
Chilean miner Antofagasta and Japan’s Marubeni are seeking to raise roughly $2bn in ECA financing through JBIC, according to a banker close to the transaction. The funds, which could reach tenors of up to 10 years depending on the needs of the mining projects, would be destined for copper exploration. The companies are heard to be in discussions to establish their exact funding needs for a joint project.
Mexico Rate Hike Likely: Barclays
Barclays expects a 25bp rate hike in Mexico this Friday, based on short term high inflation forecasts and firm international food commodity prices. “Today’s announcement by President Calderon regarding agreements to cap the prices of 150 goods reflects the seriousness of the inflation matter,” Barclays says. “We acknowledge it may pose some risk to our rate hike call, but it does not change our expectation for higher short-run inflation, and see it as a complement rather than a substitute to monetary policy,” the shop adds.
Techsphere Plans MXP Issue
Techsphere, the Mexican pharmaceuticals company, is working on a $20m equivalent domestic market debt issue via Santander. The firm is targeting 15 year floating rate and timing has not yet been decided, says a person close to the deal.