Colombia’s Colinversiones and newly acquired peer Epsa expect to invest more than $100m in domestic power generation and transmission projects, says CEO Juan Guillermo Londono tells LatinFinance. He adds that Epsa’s board has already authorized the company to issue as much as COP900bn ($453m) in local bonds to finance the development of the plants, but that an issue date has not yet been determined. The issue is rated AAA by Fitch and Bancolombia is the lead. “There is a lot of liquidity in the local market, interest rates are reasonable and there is ample appetite from investors,” Londono explains. The plants that Epsa is developing are the 20MW Amaime, in which it is investing $50m, and Tulua I and II, each generating 20MW and requiring an investment of $50m. It also has the 55MW Cucuana and the 120MW Miel II plants, but total investment has not been determined, Londono says. Amaime and Tulua are expected to become operational this year and the others should be working by 2013, the executive adds. In addition, Colinversiones is developing Termoflores IV, in which it is investing $188m, including $150m from CAF, the IFC and DEG. It is also spending $55m cash on the Hidromontanitas plant, Londono adds.
Category: Corporate & Sovereign Strategy
Itau Foresees Private Bank Surge
Itau Unibanco, owner of Brazil’s largest private banking network by assets under management (AUM), is plowing ahead with expansion, says CEO Celso Scaramuzza. “We expect the growth rate for the private banking market [by AUM] in Brazil this year to be 20%,” he says. The banker notes that a real increase of around 10% is on par with some of the world’s fastest expanding private banking markets, like China. With AUM of around BRL100bn equivalent and a 34% share of the Brazilian pie, according to ANBIMA, Itau Unibanco is focused on building out the domestic business further. A new area is managing money for families and shareholders that own significant or controlling stakes in Brazilian firms. Advisory products include liquidity event and strategic capital structure management, often done in conjunction with investment banking arm Itau BBA, says Scaramuzza. Among recent hires for the effort is Andrea Brandao, formerly of RBC’s Sao Paulo-based private bank, who will be a senior private banker for Itau. “We are growing the team and there will be more hires this year,” notes the executive. The bank is also looking to develop more elaborate investment products, both in fixed income, equity and structured finance, which can include a combination of assets. “We are seeing a higher demand for equity funds in Brazil,” adds Scaramuzza. Itau is also building its overseas network. With a pending license to operate in Zurich, the bank will have 3 non-LatAm main offices, including Miami and Luxembourg. In the region, units in Chile, Argentina, Paraguay and Uruguay complement the bank’s retail presence in those countries. Broadly speaking, says the CEO, competition in wealth management and private bank is growing significantly in Brazil. Goldman Sachs, for one, has recently built a large new Sao Paulo-based wealth management team targeting high and ultra-high net worth individuals. BTG Pactual and Credit Suisse are meanwhile competing head to head for the number 2 slot, with close
Agencies Chop Jamaica on Swap
Despite the absence of a haircut on principal, S&P and Fitch view Jamaica’s restructuring as a default and have lowered credit ratings. Fitch cut the long-term local currency rating to C from CCC, while S&P reduced foreign and local currency ratings to SD from CCC/C, and local bonds included in the exchange to D from CCC. Both agencies, however, note that a successful transaction would be positive and result in reassigning a single B level mark upon successful completion. “The debt exchange, if successful, will substantially reduce the government’s near-term debt service costs and create the fiscal space for public finance and economic reform as well as unlock support from the IMF and other multilateral creditors,” Fitch says. Fitch also notes that the proposed domestic debt exchange is unlikely to undermine the solvency of the banking sector, though lower yields on the new securities will negatively affect near-term profitability. Fitch’s outlook remains negative. S&P assigns a recovery rating of 4.
Analysts Await Next Move From CSN
Only Benjamin Steinbruch, the CEO and leading shareholder of CSN, knows what his next move will be in an ongoing battle to acquire a stake in Portugal’s Cimpor. In the meantime, a variety of expectations is cropping up in the analyst community following a Wednesday offer by Camargo Correa to merge its cement operations with Cimpor’s. Analysts at Banif-Ixe, believe CSN’s role may be coming to an early close. Steinbruch will more than likely refrain from placing a higher bid than the EUR5.75 per share it offered in December, according to Gilberto Cardoso, Rio-based mining analyst at Banif-Ixe, noting that the 10x Ebitda price tag is what Steinbruch said was a fair price. “I don’t see them putting the company under financial stress and raising debt to jump into cement,” says Cardoso, who covers CSN. Banif adds that the Camargo’s offer has a stronger chance of being considered seriously by the board and Cimpor shareholders, as it offers a premium to CSN and requires the company to relinquish less. Itau analysts meanwhile say that CSN’s 100% cash offer, which is more attractive for Cimpor’s shareholders, as well as the fact the new company would have lower leverage, give it an advantage. The analysts believe Steinbruch is willing to up his bid and that a new offer could come in the EUR7.30-EUR7.40 range. In any case, CSN is likely to wait and see how Cimpor reacts to Camargo. Itau notes that according to Portuguese law, CSN has the right to place the final bid since it was the first to do so. CSN is working with BES, while Camargo Correa has hired Credit Suisse and BofA-Merrill.
Lamosa Reprices Leveraged Facility
Mexican tilemaker Lamosa has wrapped up restructuring of a $900m loan facility after close to a year of back and forth with lenders. The Scotia-led loan from late 2007 that was restructured closed in December. It did not involve a change in final maturity or amortization schedule, though margins were bumped up significantly and a consent fee was paid to lenders. When closed in 2007 with a leverage ratio of 3.0x-3.5x, a $675m 6-year dual-currency tranche paid Libor plus 200bp. A $225m second-lien bullet loan held exclusively by Ontario Teachers’ Pension Plan (OTPP) is heard to have been paying up to 450bp at launch. As a real estate and generalized liquidity crisis hit the company, leverage was heard to have widened to 5.0x in Q1 2008 and above 6.0x soon after, causing a breach in leverage covenants, though debt service remained intact. Throughout nearly all of 2009, a discussion on what to do to compensate lenders took place and the final result was unveiled in late December. According to a banker on the deal, a leverage grid was set up whereby the company pays Libor plus 500bp above 6.0x – where it stands today – 450bp at 5.0x-6.0x; 400bp at 3.5x-5.0x; 350bp at 3.0x-3.5x and 300bp at 1.0x-3.0x. Lenders also received a consent fee of 200bp. “The result is good for everyone involved,” says a banker leading the financing. However the subordinated bullet piece held by OTPP does not benefit from adjustments made to the senior debt, says a banker on it. Another executive adds OTPP’s resistance to the workout is among the reasons for months of delay. OTPP did not respond to requests for comment. Other lenders that participated in the senior portion include BBVA, Banamex, Comerica, HSBC, JPMorgan, Unicredit, Banorte, ING, Merrill, Inbursa, ABN, Santander, and WestLB.
M3 Moves Up at Citi
Citi’s LatAm head Manuel Medina-Mora has been given expanded responsibilities, including the titles of CEO for consumer banking in the Americas and chairman of Citi’s global consumer council. In the new role, Medina-Mora will oversee Citi´s retail branch network, the branded cards business and the local commercial bank in the Americas. As chairman of the newly formed consumer council, he will be responsible for global consumer strategy. He continues to be chairman and CEO of Citi LatAm and Mexico, reporting directly to Citi’s global CEO Vikram Pandit.
TMM Wraps Up Restructuring
Mexico’s Grupo TMM has raised $41.2m through a share subscription to complete its debt restructuring. Vex, a sister company controlled by TMM chairman Jose Serrano, has taken 46.8m shares at $0.88 each to complete a process approved in December to reorganize the logistics provider’s receivables securitization debt. Under the agreement, Vex purchased the certificates with a face value of $86.5m. All but $6.0m of the purchased certificates were subsequently cancelled and exchanged for cash, equity in TMM, and other considerations, of which $41.2m represents the equity portion.
CCM Kicks Off Local Bond Swap
Comercial Mexicana has launched an exchange offer to holders of MXP1.5bn in 5 series of domestic bonds. The retailer, which defaulted on its debt in October 2008 after crippling derivative losses, seeks to replace the notes with an equal amount of new bonds due 2016. It is set to price after the close of the offer, on February 2. Ixe is managing the transaction. The new bonds are rated BB on a national scale.
Vitro Slapped With Acceleration Notice
Mexican glassmaker Vitro has received from a group of bondholders a notice of acceleration of payment on $1bn in senior notes due 2012 and 2017. The defaulted company says it has requested that the group prove its holdings. The indenture states that at least 25% of bondholders are required to get the acceleration. According to Vitro, it has not received any notice of acceleration for the $216m senior notes due 2013. It adds that a recent real estate transaction and refinancing of a trade receivable program increased the unrestricted cash position to more than $175m as of December 31. “Vitro remains focused on its balance sheet restructuring efforts and will continue its negotiations with its bondholders,” it adds.
DEALS OF THE YEAR RESULTS
Participants in last year’s capital markets bungee jump will remember it forever. In Latin America, the key lesson learned is that the bigger, more investor-friendly economies can take external shock on the chin.