Gustavo Rangel has joined ING as senior economist, focusing on Brazil and Argentina, according to a source at ING. He is set to start November 1, reporting to David Spegel, global head of EM strategy. Rangel comes from Medley Global Advisors, where he was an economist focused on Brazil. He had previously been at Barclays.
Category: Corporate & Sovereign Strategy
Posted inDaily Brief
Cemex Repours Covenants
Following the announcement of its fourth straight quarterly loss, Cemex has asked to rework bond covenants. The cement maker announced that it has agreed to pay a 25bp fee in order to make the changes, and will pay 100bp if it does not raise $1bn in equity or equity-linked securities by the end of 2011. In return, Cemex gets to reset its maximum consolidated leverage ratio to 7.75x 12-month trailing Ebitda through June 2011, decreasing gradually to 4.25x by year-end 2013. Previously it was to be 6.75x though the end of this year, before falling gradually to 3.5x by year-end 2013, according to Barclays. Cemex also reset its minimum consolidated coverage ratio to 1.75x during 2011-2012, and 2x through year-end 2013, from previous requirements of 1.75x to the end of 2011, 2.0x by June 2012 and 2.25x by year-end 2013, according to Barclays. Cemex also notes amendment to the terms of the reserve of its domestic bonds to improve liquidity and refinancing risk management, without elaborating further. Shares rose 7%, to MXP10.84, and bonds tightened 25bp, according to a report from Scotia. While Scotia notes likes the bonds from a fundamental perspective, “for spreads to rally, we think Cemex needs to demonstrate an inflection point in the downward trend in prices and volumes in order to reassure investors,” it says.
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Bank of Tokyo Names LatAm CIB Head
The Bank of Tokyo-Mitsubishi UFJ has named David M. Gruppo head of LatAm corporate and investment banking, a newly created position. He will report to Randall Chafetz, head of corporate and IB for the Americas. Gruppo has held LatAm corporate and investment banking positions at Goldman Sachs, Morgan Stanley and Santander. Most recently, he has been in various capacities with IBM, including its TJ Watson Research unit.
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Interacciones Targets MXP 3-Year
Banco Interacciones is looking to issue up to MXP1.5bn in 3 year bonds by December, CEO Gerardo Salazar tells LatinFinance. Bookrunners have not been mandated and no guidance provided. The bank is only doing a Mexico roadshow, but will look to go international for next year’s bond issues, adds Salazar. The notes are rated Ba1/A1.mx by Moody’s, and will be issued under a senior debt program of up to MXP10bn. Grupo Interacciones specializes in sub-national and public infrastructure financing in Mexico. It is also looking to issue $2bn equivalent of covered bonds in local and international markets, and $280m of subordinated debt in the next 4 years, according to Salazar.
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Brazil Private Equity Hopes to Dodge New Tax
Brazilian private equity funds, known as FIPs, are lobbying the government for an exclusion to the recently increased IOF tax. Brazil last week hiked the charge to 6% from 4% to try and contain FX appreciation from heavy cash inflows. However, the ABVCAP local private equity and venture capital association argues that its members should not be subject to the tax, due to the long-term nature of their investments. Ken Wainer, managing principal at VBI Real Estate, says FIPs have to pay the 6% tax upon receipt of foreign funds. This is a heavy burden, he adds, since payment is required before any gains can be realized. A New York-based banker who invests in Brazil says the tax increase will cause a “small slowdown” by foreign LPs investing in PE in the short term. An ABVCAP spokesman says he does not expect any change until after the upcoming elections. If a foreign investor were to invest directly in a Brazilian company without going through an FIP structure they would not be subject to the IOF tax. However, they would get hit by a capital gains tax that can range from 15%-34%, explains Christiano Chagas, partner in Mayer Brown’s Sao Paulo office.
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Correction: BNP Appoints New Loans Head
An October 21 Daily Brief entitled “BNP Appoints New Loans Head” incorrectly portrays the nature of the move. A corrected version follows:
Sarah Saint-Amand has left her role as vp in BNP Paribas’ loan syndications group, according to a spokesperson for the bank. She will be replaced by Kristie Pellechia, who has been in the bank’s restructuring division for the past two years. Ernesto Meyer remains head of loan syndication, but has relocated from Sao Paulo to New York.
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Independencia Schedules Creditor Meeting
Independencia has called a creditor meeting for November 8 in an effort to modify its restructuring plan. The Brazilian beef company shut down its operations earlier this month after missing a coupon payment on its 2015 bonds. According to Barclays, the company is likely to be liquidated. “At this point, it seems very unlikely that Independencia will re-emerge out of a second restructuring in less than a year as a going concern, and therefore we believe that studying potential liquidation scenarios makes more sense for creditors,” the bank says. It spots the recovery value at 36-45 cents on the dollar.
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IMF Sees 6% Growth in LatAm
The IMF says it expects GDP in LatAm and the Caribbean to grow 5.7% in 2010 and 4.0% in 2011. Brazil, Peru and Uruguay are expected to grow more than 7.0%, helped by export activity, while Caribbean economies are expected to grow at a slower rate of about 3.0% in 2010 due to its dependence on the US economy, which is seeing slow growth.
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Moody’s Chops Su Casita’s Rating
Moody’s has downgraded Mexican mortgage lender Hipotecaria Su Casita to C from Ca. The change comes after Su Casita missed payments of MXP300.0m on principal and MXP6.0m on the interest for its Casita 06 notes, as well as principal and interest on its Casita 01810 and Casita 01910 notes for MXP384.5m and MXP40.2m, respectively. Moody’s says Su Casita’s current liquidity position is weak, and the C ratings reflect the potential for above-average loss severity on Su Casita’s senior unsecured debt as the company continues to negations with all its creditors on a restructuring.
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Colombia Re-Assigns Spending
Spending plans of Colombia’s new government will remain broadly in line with the previous government’s, though some spending will be re-assigned and increased, German Arce, director of public credit and the national treasury tells LatinFinance. “We will re-assign around $1.5bn equivalent towards housing, infrastructure, agriculture, and science and technology education,” says Arce. He adds that the government will raise a further $2bn equivalent to go towards these sectors in 2011 and that this will largely be funded in the domestic capital markets. Arce adds that the government would not sell off strategic assets to fund projects, such as those relating to the oil sector but says some non-strategic assets, such has some small electrical plants could be sold off. Funding plans for 2011 include a dollar benchmark, and Colombia could also look to tap the Asian markets and look for investment from the Middle East. Patricia Morena, subdirector of external financing added.