S&P has changed its outlook on Aruba’s A minus rating to negative from stable to reflect the rapid growth in the Aruban government’s debt burden due to both the recent global downturn and structural factors such as a narrowing tax base. The agency says general government debt could exceed 51% of GDP this year compared to only 41% in 2008, and could approach 55% to 60% of GDP by 2015. Such a level of debt for a small, open economy with a fixed exchange rate would risk weakening its creditworthiness, possibly leading S&P to lower the ratings by one notch.
Category: Corporate & Sovereign Strategy
Posted inDaily Brief
Banco Mercantil Upgraded
Banco Mercantil do Brasil (BMB) saw its global rating upgraded to B+ from B on improving financials by S&P. It says the Brazilian bank is better positioned to take advantage of favorable conditions in the Brazilian economy. Its national scale rating moves to brBBB from brBBB minus, while its short term global scale rating remains at B, with a stable outlook.
Posted inDaily Brief
Dilma Win Fails to Stir Brazil Markets
With the markets largely having anticipated Dilma Rousseff’s victory, there was limited movement in assets following the Brazilian presidential election Sunday. Brazil’s dollar curve barely moved Monday, say traders, with the 2019 bonds up 0.25 points to 118.85-119.25. The EMBI Brazil index shed 7bp, according to a report from RBC, and the Bovespa gained 1.2%. “Solid gains in congress and among state governorships will ensure Rousseff will have a strong power-base to continue with Lula’s policies, and the expectation is that no material economic policy shift is likely,” RBC says. It expects that whoever is named finance minister will outline some sort of 2011 fiscal adjustment plan to reassure the markets. Likely candidates are Antonio Palocci and Luciano Coutinho, both seen as acceptable by the markets. Rousseff is unlikely to face as favorable external conditions as Lula enjoyed during most of his tenure, RBS notes, while she also lacks Lula’s popularity. Ironically, it says, these factors “could translate into good news, as Rousseff will need to face the challenges to guarantee sustainable growth, which requires a resumption of reforms.”
Posted inDaily Brief
Gener Ratings on Downgrade Review
Moody’s has placed Gener’s Baa3 rating under review for possible downgrade reflecting a continued delay in completion of the 270MW Campiche coal-fired plant, which has been on hold for 16 months. The review also reflects the company’s weak retained cashflow-to-debt and free cashflow-to-debt metrics. Gener is Chile’s second largest electricity generation company.
Posted inDaily Brief
Tivit Hires M&A Exec
Brazilian IT company Tivit has hired Andre Guimaraes Frederico as head of M&A and strategic planning. Frederico had previously been financing director at BRQ, another Brazilian IT services company, and had worked at Merrill Lynch and Patria Investimentos. Global PE firm Apax recently bought a 54.25% stake in Tivit from controlling shareholders Votorantim Novos Negocios and Patria Investimentos in May. “My job will be to confront the challenge of helping a technology giant continue to grow through a mix of organic and inorganic growth appropriate for the company,” says Frederico.
Posted inDaily Brief
Vitro Offers Exchange
After months of trying, Mexico’s Vitro has launched an offer to bondholders, this time with the support of its largest creditor, Fintech Advisory, it says. The glassmaker is offering cash and new securities to holders of its $300m in 8.625% of 2012 bonds, $216m in 11.750% of 2013s and $700m in 9.125% of 2017s. The move, which follows past proposals that have been rebuffed by creditors, is intended as a step toward achieving a debt restructuring carried out under Concurso Mercantil, Vitro says. The cash buyback portion offers holders up to $100m at a price of $500-$575 per $1,000 in principal, with the price to be reached through Dutch auction. Alternatively, holders can opt to exchange old bonds for new ones, receiving – for each $1,000 principal – $562 in new 8.000% of 2019 bonds, $66 in 10.500% of 2015 mandatorily convertible debentures, and a cash payment equal to accrued interest. An additional cash payment would come from any funds left in a trust used for a cash buyback that remains after the repurchase is complete. Both offers expire December 1. Vitro says creditors can expect a 68%-73% recovery. Rothschild is Vitro’s financial advisor. Vitro says no dealer manager has been retained for the offers. Vitro defaulted in 2009, as the global recession hurt revenue and the company suffered more than $300m in derivative losses.
Posted inMagazine
M&A: Asia’s Resource Play
Mexican telecoms and Brazilian oil pump up the deal volume numbers claimed by advisors, but flow is still up year-on-year, even after stripping out distorting Telmex and Petrobras trades.
Posted inMagazine
Best Bank – Dominican Republic
Banco de Reservas has shrugged off macroeconomic weakness in the Dominican Republic caused by the global financial crisis and continues to grow.
Posted inMagazine
Brazilian Boutique Investment Banks Get Squeezed
The crop of boutiques that sprang up from the bulge bracket wreckage faces fresh competition. They will need relationships, international connections and a proper structure to survive.
Posted inMagazine
Best Bank – Ecuador
Ecuador’s Banco Pichincha has been busy expanding within and beyond the country’s borders. At the same time, it has been able to keep its financial indicators in line with or better than that of the banking system as a whole.