Brazil’s Sul America, the holding company of insurance group Sul America Seguros, has had its rating revised to positive from stable by Fitch, said the ratings agency in a release. The company’s rating is affirmed at BB+. The change in outlook was due to consistent operating performance despite increasing competition and the termination of a joint venture with Banco do Brasil. For a ratings upgrade the company would need to consolidate recent expansions, have stable performance in terms of claims ratios and increased overall profitability, according to Fitch.
Category: Corporate & Sovereign Strategy
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OAS Construtora Downgraded by Fitch
Fitch downgraded OAS Construtora’s IDR to B from B+. The downgrade is the result of a substantial increase in leverage, including debt issued at the parent company, OAS Participacoes, Fitch says. Cost overruns in certain construction projects concluded in the second half of last year led to a sharp reduction in Ebitda generation.
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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.
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Brazil Housing Market Unlikely to Consolidate
Despite the fragmented nature of the Brazilian housing market, the sector is unlikely to experience significant consolidation in the near term. Alceu Duilio Calciolari, CEO of Brazilian homebuilder Gafisa, tells LatinFinance that although the market remains highly fragmented, many of the smaller companies are family-owned or have a controlling shareholder who is unlikely to sell. Duilio says he expects to see only one or two deals this year. While Gafisa is unlikely to participate, he says the company does see opportunities for project acquisitions. The company may also choose to access the local debt markets, Duilio says, although would limit itself to raising a maximum of 10% of its current net debt of BRL3.7bn ($2.27bn). Garfisa most recently went to the local debt markets in 2010 with a BRL300m ($184m) non-convertible debenture led by Santander. It also raised BRL1.06bn ($650m) in an equity follow-on last year.
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Brazilian Companies Receive Positive Outlook
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.
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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.
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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.
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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.
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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.
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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.