Brazil will need to see a sharper decline in its debt-to-GDP ratio and improve its fiscal policy in order to move up the ratings ladder after reaching investment grade last week, S&P analysts said in a conference call Friday. “The key to keep moving up the ratings table will be an effort to bring fiscal policy in line with higher-rated countries,” says Lisa Schineller, S&P MD. She sees the ending of the CPMF tax in December as an example of a setback. The decision to raise the Selic 50bp to 11.75%, the first increase in three years, was also key to the timing of the rating action. The move “reinforces the operational independence of the central bank, which is a key underpinning of this rating and an example of a proactive policy move,” she said. S&P also expects the real to depreciate this year due to a widening current account deficit, and a narrowing trade surplus.
Category: Bonds
IDB Approves Brazil Environmental Loans
The IDB has approved an $83.2m 25-year variable interest rate loan for improvements in the quality of water and in infrastructure to avoid floods in Porto Alegre, Brazil. The facility will help to improve environmental management in the municipality of Porto Alegre and promote efficient municipal water, sanitation and storm drainage services, the multilateral says. The loan has a 5-year grace period. The multilateral also approved a $56.7m 25-year loan to the municipality of Goiania for an urban environmental program in the Macambira and Anicuns River watersheds.
The Chinese Curse
Michael Pettis cut his teeth in LatAm DCM two decades ago. The Beijing-based academic warns of further EM crisis.
by James Crombie
Shifting the Paradigm
LatAm has undergone constant evolution in the last 20 years, says CAF president Enrique García. But income inequality remains a glaring problem.
by Julio Urdaneta
Local Currency Extensions
After a long struggle to define itself as a relevant institution, the IDB is proving its worth as a local currency innovator. It seeks to lend more and leverage guarantees.
by James Crombie
IDB Approves Financing for Brazil’s Sabesp
The IDB has approved a $250m 15-year loan for Sabesp, the water and wastewater company of the state of Sao Paulo, Brazil, to support capital investment. The multilateral will provide Sabesp an A loan of up to $100m from ordinary capital and a syndicated B loan of up to $150m from commercial banks to help finance part of the utility’s 2007–2010 capex program. Funds will also be used to refinance part of Sabesp’s debt, including a eurobond maturing in June 2008. Pricing and terms were not disclosed. The deal is not guaranteed by the sovereign.
Peru LNG Launches Upsized $400m Syndication
Peru LNG has launched to retail a $400m B loan backed by the IDB that is part of the regasification terminal’s $2.5bn financing package. The 15-year loan (C+12 years) was upsized from an original $250m amount, based on interest from participants, according to a banker familiar with the transaction. The sponsor and MLAs Societe Generale and BBVA are inviting fewer than 10 banks, hoping to add to ING, Sumitomo Mitsui and Mizuho, who joined prior to launch. The rest of the financing package supporting the more than $3bn project includes ECA guarantee facilities from the US Export-Import Bank ($400m), Export-Import Bank of Korea ($150m) and Italy’s Sace export credit agency ($250m). There is also a $300m IFC A loan, a $400m IDB A loan, a $150m direct loan from the Export-Import Bank of Korea, and up to $350m in local bonds underwritten by Peruvian banks and arranged by Banco de Credito del Peru. Sponsors Hunt Oil, SK Energy, Repsol YPF and Marubeni have contributed more than $1bn in equity.
IDB Approves Loan to Chile’s Public Transport
The IDB has approved a 16-year $400m non-sovereign guaranteed loan to provide financial support to Transantiago, the public transportation system of Santiago, Chile. The proceeds will be managed by Transantiago Financial Administrator (AFT), the private sector entity responsible for the system’s payments and collections. The loan will also support Chile’s comprehensive plan to improve the operation and quality of Transantiago’s bus and subway services, which are used by some 5.4m passengers a day. The IDB is also preparing a $10m loan for a program led by Chile’s Ministry of Transportation and Telecommunications to establish the Metropolitan Transportation Authority, which will monitor Transantiago’s services.
Posadas to Buy Back $189.2m Bonds
Grupo Posadas announced plans to buy back $189.2m in 8.75% of 2011 bonds, following the closing of a tender offer. The total represents 84% of the $225m outstanding. The hotel operator is paying $1,050 per $1,000 in an offer launched March 17, with Credit Suisse as dealer manager. Posadas is funding most of the transaction with proceeds from MXP1.5bn in 2013 floating-rate bonds it sold last week, also via Credit Suisse.
Mato Expands I-Bank Role at HSBC
Gerardo Mato, HSBC’s LatAm DCM veteran, has expanded his reach at the UK bank. Mato and Tom Cole were recently named co-heads of global banking, Americas. They report locally to Paul Lawrence, head of global banking and markets, Americas and functionally to Robin Phillips, head of global banking, according to an internal memo. Mato also retains his role and title as head of global capital markets-Americas. The shop is billing the move as a “further step in HSBC’s execution of its emerging markets-led and financing-focused strategy.”