Petrobras plans to raise $60bn from the debt markets in the next 5 years, according to local press and wire reports citing CEO Jose Sergio Gabrielli. Fresh off of a $70bn equity raise last month, the state-run oil producer will now turn to debt markets as it looks to fund an investment plan of more than $220bn. Petrobras does not foresee additional equity, Gabrielli is reported as saying. The company’s borrowing needs, and the effect they might have on its credit ratings, have been among the factors dragging down the stock this year. Petrobras preferred and common shares closed Friday at BRL26.00 and BRL29.00, respectively, representing drops of 3.0% and 4.1% since the September 23 equity sale, and of 28.8% and 29.0% on the year.
Category: Corporate & Sovereign Strategy
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HSBC Adds Equity Head
HSBC has hired Delfons Machado Neto as head of LatAm equities, according to a bank spokeswoman. Machado, who was previously a partner at Dunamis Equity Partners in New York, will be based in Sao Paulo. Prior to Dunamis, he had been head of equity trading at Itau and head of equity and derivatives trading at Santander Brasil.
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Ixe Cancels Mexicana Flight
Ixe does not plan to continue in Grupo Mexicana de Aviacion’s restructuring process, it says. The bank had previously said it was considering a small stake in the airline, if it was able to successfully reorganize its finances and resume operations. Bankrupt Mexicana stopped operations earlier this year, with holdco Tenedora K, a company formed by Mexico’s Grupo Industrial Omega and Grupo Arizan, buying control from owners including Ixe.
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UBS Taps Centola For Brazil
Eduardo Centola has resigned as head of corporate investment banking for the Americas for Standard Bank, and will be going to UBS, according to a representative at Standard. He is expected to lead the rebuild of UBS’ investment banking division in Brazil. UBS declines to comment on the news, though a person close to the company says confirmation will be issued shortly. Centola joined Standard from Goldman Sachs in 2009, one of several who left Goldman for Standard that year, particularly on the Brazil M&A side. He was co-head of LatAm investment banking at Goldman. To counter a slew of senior LatAm IB, UBS has been quietly staffing up in a variety of product areas this year, and had been expected to make senior Brazil appointments. According to UBS, since it bought Brazilian brokerage Link Investimentos for BRL195m in April, it has jumped to fourth by market share of cash equity trading market, from seventh previously.
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Peru Rate Hike Expected
Peru’s central bank is expected to tighten its monetary policy rate today. Morgan Stanley forecasts it will hike 25bp to 3.25%, less than the 50bp increase seen in August and September, due to low inflation. Barclays also expects a 225bp hike, with the rate ending at 3.5% by the end of the year. Bank of America Merrill Lynch meanwhile predicts a 50bp hike. It expects Peru to end the year at 4.25%.
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Bolivia Gets Ratings Upgrade
Fitch has upgraded Bolivia’s rating to B+ from B. the outlook is stable. The rating upgrade reflects Bolivia’s strengthened fiscal and external balance sheets, the economic authorities’ demonstrated ability to preserve macroeconomic stability, as well as a recent track record of timely debt payments, Fitch says. The economy’s resilience was evidenced by a real GDP growth rate of 3.4% in 2009, while growth for 2010-2011 will remain above 4%, according to Fitch, driven by a recovery in external demand and a strengthening of consumption and public investment expenditure.
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Brazil Hikes IOF to Stem BRL Rally
In its attempt to contain BRL appreciation, Brazil’s finance ministry increased the IOF financial transaction tax on foreign investor inflows into domestic fixed income securities to 4% from 2%. Market consensus points to only a short-term effect on the BRL. Luis Cezario, an economist with Goldman Sachs, believes the BRL could weaken slightly to BRL1.70-BRL1.80 per USD within the next 1-2 months from a current range of BRL1.65-BRL1.75. RBC agrees, saying that the tax hike will induce some short-term weakness in BRL initially. “However we expect this effect to be transitory and that appreciation pressures should remain fairly strong given the pace of capital inflows are unlikely to be altered materially by this tax change in the current context of G4 currency weakness, quantitative easing and significant excess global liquidity in the world’s financial markets,” the shop says. Domestic bond yields could spike 20bp-40bp along the curve with foreigners’ large holdings of issues in the long-end likely having a larger impact there, encouraging a steepening of the yield curve in the immediate future, RBC adds. On Tuesday, BRL closed 2.4% stronger at BRL1.66 per USD. This is not the first time the ministry has hiked the IOF tax to contain BRL appreciation. Credit Suisse, which also agrees that the effect will be temporary, says that in March 2008 the IOF rate was increased to 1.5% from 0.0%, reduced back to zero in October 2008 and then raised to 2.0% in October 2009. The new change, which took effect yesterday, will not affect equity investments, for which the IOF tax remains at 2%.
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Cablemas Rating Rises
Fitch upgraded the ratings of Mexico telecom Cablemas to BB from BB minus to reflect the company’s improved financial profile and stable debt levels. Fitch expects leverage measured as total debt to Ebitda will remain between 1.5x and 2.0x in the medium term. In addition, it says the company’s debt maturity schedule is manageable. Total debt-to- Ebitda for the last 12 months ended June 30 is 2.1x, down from 2.3x in 2009.
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Fitch Lifts BRMalls to BB
Fitch has upgraded the rating of Brazilian mall developer BRMalls Participacoes to BB from BB minus. The outlook is stable. Fitch says the upgrade reflects the company’s dominant business position as the largest Brazilian shopping center operator with participation in 37 shopping centers, stable and predictable cash flow generation, Brazil’s positive economic environment, geographical and property revenue base diversification, and low working capital requirements with renters responsible for most maintenance expenses. It also says BRMalls’ Ebitda for the last 12 months ended June 2010 was BRL358m, which positively compares with its Ebitda levels of BRL320m in 2009. The company’s net debt/Ebitda ratio was 2.0x at the end of June 2010. The company’s net leverage was 1.0x at the end of December 2009.
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CSN Gets S&P Upgrade
S&P has upgraded the ratings of Brazilian steel company CSN to BBB minus from BB+ to reflect the company’s operating performance, which it says has been stronger than that of its peers even during the market slowdown of 2008 and part of 2009. “We believe CSN will consistently sustain strong liquidity, as it has historically, mitigating its aggressive gross leverage ratios,” S&P says. It adds that its projections suggest that the company’s net debt ratios are adequate for the rating category, even using conservative steel price assumptions, despite CSN’s ongoing large, but partly discretionary, capital expenditures program and aggressive dividend distribution. S&P says the company reported BRL9.7bn in cash as of June, compared with BRL1.4bn in short-term debt.