Several Brazilian companies including Petrobras, Banco Nacional de Desenvolvimento Economico e Social, Banco do Brasil, Banco do Nordeste do Brasil, Banco Santander (Brasil), HSBC Bank Brasil and Banco Citibank have had their outlooks revised to positive from stable by S&P. The change stems from the revision of the ratings agency’s outlook on Brazil’s BBB minus rating to positive from stable. The outlook change for the country is the result of strengthening prospects for steady, long-term GDP growth and modest current account and fiscal deficits, says S&P. The country’s diverse economic structure, expanding middle class, and the potential for higher exports should sustain both GDP growth and external liquidity in the next three to five years, the agency says.
Category: Corporate & Sovereign Strategy
EM CDS Volumes Increases in 2011
Trading in EM CDS rose to $306bn in Q1 2011, up from $208bn in Q4 2010, representing a 47% increase, according to EMTA. However, this was a 23% decrease from Q1 2010, when EM CDS volume was $397bn, says EMTA. The most frequently traded sovereign contract was the Brazilian CDS, at $48bn. Turkish government CDS trading totaled $36bn, while Mexican sovereign CDS contracts came to $32bn. The most frequently traded corporate CDS contracts were those for Gazprom ($8n). Pemex’s CDS volume was $2bn, while Petrobras’ CDS trades were for $1bn.
Trasatlantico Gets Rating Raise: Fitch
Banco Trasatlantico saw its rating changed to B from B minus on a national scale, and its outlook changed to stable from negative by Fitch. The ratings change reflects structural changes in its management team and corporate governance, according to the ratings agency. Stabilization of its balance sheet and deposits also contribute to the change.
Vulcabras Pulls FO
Vulcabras, a Brazilian maker of shoes and sporting goods, has cancelled its registration for a follow-on equity offer, according to the CVM. The owner of brands including Olympikus, Azaleia and Dijean was looking to raise funds for capex and possible acquisitions, and had filed for the transaction in December. It does not indicate the size or timing of the sale, to be composed entirely of primary shares. BTG Pactual was managing. Vulcabras’ preferred shares closed at BRL18.00 Monday. Despite would-be issuers continuing to pile into the Brazilian new issuance pipeline, dropouts have also been increasing. The other resent deals to be pulled – Desenvix and BrasilAgro – were in sectors where deals have seen more difficulty than those more directly tied to consumer discretionary spending. Fellow shoemaker Arezzo, for example, was one of Brazil’s more successful IPOs this year, pricing at the top of its range and trading up to BRL24.80 Monday from a BRL19.00 pricing in January.
Carstens Put Forward as IMF Head
Mexico’s former finance minister and governor of its central bank, Agustin Carstens, has been put forward as a candidate to head the IMF, the Mexican finance ministry says in a release on its website. Carstens became the central bank governor in January 2010, and was the finance minister since 2006. Carstens was also deputy managing director of the IMF from 2003 to 2006. “His extensive experience in the financial sector in Mexico and at an international level make him the appropriate candidate to take the position of managing director,” says the release.
EM Ratings Stabilize: Fitch
Emerging Market corporate ratings have normalized in the wake of the impact of the global financial crisis, according to a Fitch report. The ratings agency, in a report titled “Mid-Year Emerging-Market Corporate Outlook 2011,” says it is forecasting 5.5% GDP growth for EM in 2011, and 5.7% GDP growth in 2012, versus global GDP growth of 3.2% in 2011 and 3.3% in 2012. Growth expectations for EM corporates broadly reflect the prospects for global GDP development over the next two years, the agency says. EM and developed market corporate ratings are continuing to converge, according to the report, although LatAm remains constrained by limited scale and diversification, weak financial profiles and corporate governance. Aggregate EM corporate cross-border issuance rose to $309bn last year from $136bn in 2006, although sovereign ($566bn) and EM financial institution ($671bn) continue to dominate. Corporate issuers are being attracted to the global markets by the opportunity to diversify funding and achieve longer tenors. EM corporate issuance is roughly even broken down between LatAm, MEA and CEE, with Brazil and Mexico leading the region for corporate cross-border issuance. EM syndicated lending peaked at $442bn in 2007, and rose only to $263b in 2010. LatAm has not been a significant destination for syndicated lending, accounting for only 9% of the 2010 total, according to Fitch.
Fitch Upgrades Senda Outlook to Positive
Fitch upgraded the rating outlook for Grupo Senda Autotransporte’s to positive from stable. The positive outlook incorporates expectations that for the 12 months ending in December 2011, Grupo Senda have a stable Ebitda margin of 22%, net leverage below 3.5x, a cash position above MXP250m ($21m) and short-term debt maturities below MXP350m. The company is expected to continue to benefit from the positive trend of the Mexican economy, which is expected to grow 4.2% during 2011 and 4.0% in 2012.
Mexico Airport Bids Rejected
The Mexican ministry of communication and transport declared void bids for the concession to build and operate the Riviera Maya airport in Tulum, it said in a statement on its website. The ministry said that the reason was because none of the three proposals complied with the general bidding requirements. It added that it is yet to evaluate when it will be convenient to carry out another bidding process.
S&P Gives Brazil Positive Outlook
Standard & Poor’s has revised its outlook on Brazil’s BBB minus rating to positive from stable, it says. “The positive outlook reflects Brazil’s strengthening prospects for steady, long-term GDP growth, along with modest current account and fiscal deficits that should gradually reduce the country’s vulnerability to negative external shocks,” S&P says. The country’s diverse economic structure, expanding middle class, and the potential for higher exports should sustain both GDP growth and external liquidity in the next three to five years, the agency says. Political consensus in favor of cautious fiscal and monetary policies contains risks coming from potential shocks, it says, and recent steps to contain short-term inflationary pressures demonstrate the government’s commitment to contain macroeconomic risks. The government must remain committed to its prudent economic approach, considering the government’s limited fiscal flexibility and high domestic interest rates. Brazil is rated BBB minus/BBB/Baa3.
Barclays Credit Analyst Departs
Alex Monroy has left Barclays Capital, where he was a LatAm corporate credit analyst, according to a source at the bank. After leaving earlier this month, he is heard headed to a similar position at Nomura, as the Japanese bank expands its research capabilities in the region. His coverage at Barclays is to be divided up among his teammates. A Nomura official was unable to comment on the matter.