Moody’s has downgraded Cerveceria Nacional Dominicana’s (CND) corporate family and senior unsecured ratings to B1 from Ba3. The outlook is stable, up from negative. S&P downgraded the Dominican brewer to B from B+ last month. Moody’s cites weaker than anticipated operating performance and credit metrics compared with expectations, a higher tax burden, competition and softer demand. CND’s revenues have remained flat while earnings were under pressure following changes to the Dominican Republic’s tax regime, while pricing power has been pressured by the economic downturn. The ratings agency reports that the stable outlook reflects expectations the brewer will successfully refinance its $31m bridge facility by issuing local notes in the Dominican market, and begin addressing the maturity of its peso-linked 16% global notes in March 2012.
Category: Corporate & Sovereign Strategy
FertiNitro Bond Pressure Lingers
Fitch says it is keeping the CCC ratings of Venezuela’s FertiNitro Finance’s $250m 8.29% secured bonds due 2020 on rating Watch Negative. Fitch expects rating pressure to remain through 2011, when the project reaches its maximum annual debt service requirement. The subsequent decline in debt service coincides with the maturity of bank debt separate from the secured bonds. Fitch notes that FertiNitro on September 28 made timely payment of $40.3m in semi-annual debt service. “Overall, FertiNitro continues to make progress since Fitch’s last review in March 2010 with improved operational performance, resulting in positive cashflow and a debt service coverage ratio of 1.98 times,” it adds. FertiNitro is expected to deposit over $36m to the debt service reserve fund after the October debt payment.
JPMorgan Heard Appointing Loan Expert
Rodrigo Gracia will be joining JP Morgan’s syndicated loans team, say people with knowledge of the situation. He was heard to have recently quit as vice president at Credit Agricole’s syndicated loans group after 6 years at the bank. Gracia has previously worked at JPMorgan, from July 2000 to December 2001in the syndicated finance division, where he was involved in structuring and executing syndicated loan transactions in the US and LatAm. He has also worked at Dresdner Kleinwort Wasserstein and Serfin in Mexico. JPMorgan has been without a head of LatAm loan syndications since it made Ricardo Rubio redundant in late 2008 as part of a 10% reduction in global headcount, focused on investment banking and including other senior debt bankers. The bank has long been expected to replace Rubio to support an active DCM, ECM and M&A franchise. However, it is understood to have covered LatAm from its US loan desk over the last few years, given the very low level of activity in regional syndications. A JPMorgan spokeswoman declines to comment and Gracia does not return calls.
Enersis and Endesa on Upgrade Track
Moody’s says it has placed the Baa3 ratings of Chile-based electricity companies Enersa and Endesa, both units of Italy’s Enel, under review for possible upgrade. It cites improved macroeconomic factors and lessened concern for the parent company’s dividend policy. “While the parent has publicly committed to reduce leverage in terms of net consolidated debt, we observe that the dividend policy affecting Enersis and Endesa Chile operations has not changed materially within the past year,” Moody’s says. “We also believe that the existence of the minority ownership structure reduces the financial rationale for Enel to greatly increase distributions from its LatAm operations as this would result in a substantial cash outflow to the minority shareholders that would deteriorate it’s consolidated net debt position,” it adds.
LatAm Defaults Down In 2010
Default rates in LatAm have decreased sharply compared to 2009, and are expected to continue to drop, says Moody’s in a report. While in 2009 there were 21 defaults totaling $4.4bn, so far this year there have been just 2 defaults, for a value of $1.2bn. The default rate in 2009 was the highest since 2002, peaking at 10.6% on speculative-grade debt, lower than the global rate of close to 13.5% in H2. Moody’s default rate forecasting model predicts that 1-year LatAm and global speculative default rates will drop to 1.3% and 2.6%, respectively, at the end of 2010. The default rates are expected to decline further to 0.7% and 1.8%, respectively, by the end of July 2011. “There has been a marked reduction in the volatility of rating changes in the Latin American region over the past couple of years and speculative default rates have fallen rapidly from the elevated levels in 2009,” says Steffen Sorensen, Moody’s senior analyst. The report adds that 405 of LatAm issuers were investment grade at the end of July 2010. This is 40% of the total, down slightly year-on-year, but nearly twice as many as at the end of 2000. “Despite lower speculative-grade default rates in Latin America during the recent global recession, Latin American issuers have historically carried lower average ratings and correspondingly higher average default rates relative to global issuers,” says Sorensen. “Latin American corporate credit ratings have performed on par with global ratings,” he adds. The study examines the rating histories and default experience of 434 Latin American corporate issuers which have had Moody’s-rated local and/or foreign currency debt outstanding between January 1990 and July 2010.
Anhanguera Names CEO
Brazilian education company Anhanguera Educacional has named Alexandre Dias as CEO. He replaces Ricardo Scavazza, who returns to his previous position of CFO. Dias joins from Google Brasil. He will mainly work to enhance the application of IT in Anhanguera’s courses.
Aguzin Joins JPMorgan Brass
Nicolas Aguzin, CEO of Latin America at JPMorgan, has joined the bank’s firmwide executive committee, according to a memo from global chief Jamie Dimon. Dimon says Aguzin is part of a group of key senior leaders from across the firm.
EXCLUSIVE: Panama’s Motta Eyes Home Potential
In a rare interview, Panamanian mogul Stanley Motta weighs his country’s potential for growth in infrastructure and capital markets. He does not rule out M&A for Copa.
Investment Bank Compensation: Brazil Pay Leads EM
As competition to attract talent intensifies, Brazilian investment bank pay could spiral out of control. Upwards salary pressure shows no signs of abating.
Bill Rhodes: The LatAm Moment
Veteran banker Bill Rhodes says shifts in global growth create opportunity for LatAm. He predicts a slowdown in the US, which he urges to strengthen ties with the region.