Mexico’s government has named Antonio Vivanco as CEO of state-owned utility CFE. He replaces Alfredo Ayub, who is leaving after 12 years for health reasons. The move follows a month-long transition in which Vivanco was deputy CEO. Vivanco was most recently chief aide to President Felipe Calderon, and has worked in Mexico’s finance ministry, as well as in the private sector for consultants McKinsey.
Category: Corporate & Sovereign Strategy
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Gruma Gets Upgrade
S&P has raised Gruma’s ratings to BB minus from B+, it says. The agency notes the “substantial reduction” in debt, using proceeds from the sale of the Mexican tortilla maker’s MXP9bn stake in Banorte. Total debt to Ebitda dropped to 2.4x, and the agency expects it to stay below 3x. S&P notes vulnerability to fluctuations in commodity prices and the threat of nationalization of its Venezuela business, and calls its liquidity profile “less than adequate,” estimating 2011 free cash flow of $40m, compared to $156m in short-term debt. The outlook is positive.
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Analysts Shrug at El Salvador Downgrade
Markets are likely to shrug off a Moody’s downgrade of El Salvador to Ba2 from Ba1, according to debt analysts. Boris Segura, a debt analyst with Nomura Securities, says the bonds have been trading as a low double B for months. “There shouldn’t be much of a reaction,” he says. Citi says in a note that the movement is not a surprise, and envisages a further downgrade by Fitch. S&P downgraded the sovereign to BB minus from BB on political developments in January.
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CNO Aims for Low 6%s
Brazil’s Odebrecht is heard whispering a 6.0%-6.5% yield for an expected $500m 2023 bond likely to price in the next few days. Investors say such a price is attractive versus the builder’s outstanding 2020 bond. The BBB minus/BB bond amortizes in two equal installments in 2022 and 2023. Odebrecht is raising funds for a tender offer that it launched on Monday. It is offering to buy any and all of its outstanding 9.625% of 2014, 7.500% of 2017, and 7.000% of 2020 bonds for cash. It would pay holders of the $200m in outstanding 2014 bonds $1,190 per $1,000. Holders of $400m in outstanding 2017 would get $1,110 per $1,000, and holders of the $500m outstanding in 2020s would receive $1,097.50 per $1,000.00. The offer is subject to getting financing for the operation, and CNO reserves the right to cancel the 2020 offer if the combined acceptance from the 2014s and 2017s tops $500m. BAML and HSBC are managing the offer and the new sale.
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JBS Sees Debt Restructuring
JBS is contemplating a debt restructuring operation, according to remarks made by CEO Wesley Batista. With the aim of boosting annual profit by $100m, the meat producer is considering the sale of new bonds, obtaining bank loans, or transferring $2bn in debt to the JBS USA unit. The company may decide on a specific plan in the next 90 days, according to Batista. Batista’s comments come in conjunction with JBS’ earnings reporting. The meat company posted a Q4 2010 net loss of BRL539.3m, compared to a profit of BRL127.9m in the last quarter of 2009. The company said nonrecurring debentures payments and restructuring costs for some of its units had a negative impact on the results. The company also plans to focus on organic growth in 2011.
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SABMiller to Swap Bavaria COP Bonds
SABMiller is expected to swap out COP1.9trn ($1.0bn) in existing Bavaria bonds next week through a tender offer, says a banker on the deal. The global brewer will not be issuing new debt, the banker says. “SABMiller will issue new notes in its own name to replace Bavaria’s,” he adds. The Bavaria notes are pegged to the IPC. Bavaria’s outstanding bonds include its IPC + 8.18% of 2012s, IPC + 7.5% of 2013s, IPC + 7.3% of 2014s, and IPC + 6.52% of 2015s. All are rated AAA. Correval is managing the swap.
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Uruguay Makes Surprising Rate Hike
Uruguay’s central bank tightened its rate by 100bp to 7.50%. Market consensus pointed to a 25bp hike. “The central bank seems to have felt that the balances of risks are now clearly tilted to more inflation, a diagnosis with which we fully agree,” says Barclays. “The central bank concerns are clearly backed by recent data: inflation printed 7.7% y/y in February; 12-month inflation expectations remain above the current target range (4%-6%); unemployment remains at historically low levels; and domestic spending is expanding at a very strong pace,” it adds. Citi was expecting a 50bp hike.
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BHG Nabs Rio’s Hotel Intercontinental
Brazil Hospitality Group (BHG) says it has acquired 100% of Brascan Imobiliaria Hotelaria e Turismo, owners of Rio de Janeiro’s Hotel Intercontinental. BHG CEO Pieter J. F. van Voorst declines to say how much the company is paying. The transaction will be financed with “a mix of equity and long-term debt,” he says. The debt portion is being provided by Bradesco, he tells LatinFinance, without disclosing terms. The deal was privately negotiated. The hotel has 418 suites. It will receive the Royal Tulip flag, which is the upscale brand of Golden Tulip. “We are planning to invest BRL25m in the renovation of the establishment,” van Voorst says. “We will be moving ahead with our plan for the consolidation of our brand throughout the country, and Rio de Janeiro will unquestionably be one of the most strategic regions for BHG,” he adds.
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Alsea Looks Abroad
Mexico’s Alsea plans to grow organically in South America as well as in its domestic market, CEO Fabian Gosselin says. The operator of restaurant brands in Mexico, Colombia, Chile and Argentina including Starbucks, Dominos Pizza and Burger King is studying the Brazilian market, Gosselin tells LatinFinance. “We are looking at going into Brazil because of its potential,” the official says. In the case of Brazil, the company would also consider acquisitions. Alsea is just starting to analyze growth opportunities in Brazil, after last year selling out of its only holding there, a minority position in Starbucks. This time, he says its goal would be to buy a brand which already has a strong management team in place, and expand from that with some of Alsea’s other brands. The company used the same strategy to enter Argentina, he notes. Only a medium to large acquisition would require outside financing, he says. In Mexico – still 80% of Alsea’s business and likely to remain more than 70% – there is room for organic growth in its casual dining brands, Chili’s and PF Chang’s, as this segment is much less competitive than fast food. Starbucks should be responsible for a large portion of Alsea’s organic growth in Mexico and Argentina, he says. The company will use its own cashflows to fund growth, he adds. “After 2009, we almost stopped [growing] but now we see the trends of consumption picking up,” Gosselin says, noting general economic recovery in the US and in Mexico.
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Moody’s Sweetens Peru Outlook
Moody’s has changed the outlook on Peru’s Baa3 rating to positive from stable. It cites favorable growth prospects sustained by continued improvement of Peru’s fiscal and debt metrics, expected policy continuity and receding political risk. “The positive outlook recognizes that the threat that an anti-system candidate could derail Peru’s current economic path – a longtime constraint of the country’s credit rating – has diminished significantly,” Moody’s notes. Local opinion polls show former president Alejandro Toledo in first place, with nationalist Ollanta Humala practically tied with Keiko Fujimori for second place, former Lima mayor Luis Castaneda in third place and former prime minister Pedro Pablo Kuczynski in last place. First-round elections will take place April 10. “Any of the five leading candidates has a chance to make it to the run-off,” says Goldman Sachs. “Voters are not seeking a radical change in policies, but improvements that could reduce income inequality and poverty levels,” it adds.