Petrobras is studying the possibility of holding a new share sale to raise money needed to develop its newfound oilfields, according to wire reports citing CEO Jose Sergio Gabrielli. Gabrielli added that no sale is yet scheduled, and that the company prefers to issue debt – pointing to a debt-to-revenue ratio of 17% that could be boosted to 25-35%. The state-controlled oil producer has said it plans to raise about $5bn in debt this year, and is expected to come to that market this fall, following an aborted cross-border bond deal after a non-deal road show this spring.
Category: Corporate & Sovereign Strategy
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Standard Chartered Promotes in Private Bank
The Standard Chartered Private Bank has appointed Diego Folino regional head of its Americas unit based in Miami. Folino is currently President and CEO of Standard Chartered Bank International, formerly American Express Bank International. He will be responsible for the private bank offices in New York, Miami and LatAm, as well as governance oversight of the Miami office and of the private bank network marketing offices in California and Canada. He reports to Peter Flavel, global head of Standard Chartered Private Bank, as well David Stileman, CEO of Standard Chartered Americas. Folino was previously CEO of Standard Chartered Mexico, where he was largely responsible for broadening corporate and institutional client relationships and building the wholesale franchise. Gil Schmidt, regional head of Standard Chartered Private Bank Americas was meanwhile appointed global head of strategy implementation and new ventures.
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Fitch Notes Bermuda’s Low Debt to GDP
Fitch has affirmed Bermuda’s long-term foreign currency issuer default rating at AA+ (stable). Bermuda’s 2007 general government debt as a proportion of GDP was 6.1%, versus a AA category median of 24.1%. A high per capita income, low public debt burden, and mature domestic political system support Bermuda’s creditworthiness, Fitch says. “The ratings also reflect Bermuda’s strong offshore international financial center underpinned by a proven track record of effective management of the economy and business environment,” Fitch adds. Bermuda has a 10% of GDP policy limit for net general government debt and a sinking fund for repayment of future maturities. Limited information about the debt of foreign-owned entities residing in Bermuda remains a key rating constraint, even though these liabilities are highly unlikely to affect Bermuda’s public finances or the domestic financial system, says Fitch.
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Lehman Warms to Argentina Warrants
Despite a generally bearish view on Argentina, Lehman sees value in sovereign GDP warrants, especially when hedged with CDS. “If Argentina does not default, the warrants offer significant upside in the long term,” says the shop. Lehman’s models show the USD and EUR warrants having theoretical values of $16.85 and $14.50, respectively, while they trade in the market at discounts of nearly 50%. “These estimations already take into account the bearish sentiment by discounting expected coupons by current CDS levels plus an additional 250bp to account for a lower recovery rate and higher risk premium on the warrant,” says the shop. On the USD warrants, Lehman expects total payments through December 2010 of $8.94, and $8 for 2011 to 2035. It sees best value in EUR warrants, saying that they are 3.6% cheap to the USD warrants, whereas they normally trade 1% rich.
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Peru Rate Hike Expectations Fueled by Inflation
Peru’s Central Bank was expected to increase its reference rate by 25bp to 6.25% last night following its monetary policy meeting, according to Credit Suisse. Although headline and non-food inflation increased slightly in July, the tightening at monetary policy is aimed at curbing domestic demand growth and at preventing second-round effects from food and fuel inflation, CS adds. In its last meeting, the bank increased its interested to 5.75% to 6%.
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Vale Says Not Seeking Big Ticket M&A
Roger Agnelli, the CEO of Brazilian miner Vale, says he is not focused on large acquisitions, according to wire reports citing his remarks on a Thursday conference call. A more likely scenario is for Vale to make small and medium-sized purchases, according to the reports. Agnelli reportedly considers acquisitions possible but not probable. The company is also actively developing a number of organic growth projects. Earlier this year Vale tried to acquire Xstrata for some $90bn, and raised upwards of $50bn in debt financing for the deal, which fell apart before any agreement was signed. It is also in talks to acquire Paranapanema assets in Brazil, and rumored as a potential bidder for CSN’s Namisa and Mexico’s Autlan, both of which are on the block. In June it raised $12bn through an equity follow-on without specifying use of proceeds, other than saying capex and potential acquisitions were possible. An eventual acquisition of Lonmin by Xstrata would make the Swiss company even more expensive. Xstrata this week made an unsolicited bid $10bn for Lonmin, which was summarily rejected by the target.
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Techint Plans up to $15bn Rio Pipe Plant
Global pipemaker Techint plans to build a multiple part steel complex in the state of Rio de Janeiro, Joaquim Levy, the state’s finance minister, tells LatinFinance. Levy, who has been speaking with Techint CEO Paolo Rocca, says the Argentina-based firm is eager to invest in Brazil. The cost of the plant is estimated at least $10bn, and as much as $15bn. The site of the planned facility, which will produce among other things steel pipes for oil and gas transmission to be used by Petrobras, is on a plot of land belonging to Eike Batista, where the resources magnate is planning to build a port. “The property has got a beachfront that is the length of Manhattan,” says Levy of the plot. Batista’s MPX will also be building a 6,000MW power generation facility in the area to service several of new industrial complexes, as well as the southeastern region of Brazil. Techint recently secured a cash windfall from the nationalization of Sidor in Venezuela.
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Lehman Tips Ecuador Switch
Lehman is advising investors to sell Ecuador sovereign 2015s and buy the 2030s, adding that default risk is still quite low. “In the short run, the calendar should limit the space for attempting any restructuring of bonds, while further ahead, the logic of paying is overwhelming, and we think that President Correa will remain pragmatic about the external debt,” says Lehman. “Due to cross default language in bond covenants, any potential problem with either 2012s or 2030s will very likely negatively affect the 2015s. Even more certainly, the 2030s have virtually no chance of being called in the near future,” it adds. According to Lehman, the spread between 2015s and 2030s has widened to about 115bp on a recent stronger bid for 2015s. This is about 2 standard deviations away from the mean, and it may not prove sustainable, says the shop. “It makes sense to sell the 2015s at current levels to capture 115bp of additional spread. Investors can take out about 7-7.5 points making this switch,” says Lehman.
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Unidas, Paranapanema Debentures Are Go
Brazil’s CVM has approved a BRL250m debut debenture issue from rental car agency Unidas. The 2012 notes will pay interest at the DI rate plus 2.75%. Itau is managing the sale. CVM also approved a BRL950m convertible debenture issue from metals producer Paranapanema. That offer will come in two series: a BRL200m 2010 tranche paying the IPCA inflation rate plus 6%, and a BRL750m tranche paying IPCA plus 9%. Santander is managing the sale. Separately, developer Trisul has started its debut BRL200m 2013 issue, paying DI plus 2.5%, via Bradesco.
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Further Colombia Rate Hike Unlikely: Barclays
No further hikes are expected in the near future from Colombia, according to Jimena Zuniga, an economist at Barclays. “The last three adjustment decision happened when inflation accelerated significantly and unless something like that happens again, the most likely scenario is to leave the rate unchanged at the present level in the upcoming months,” she says. Colombia’s central bank increased its benchmark interest rate by 25bp to 10.00% from 9.75% Friday citing inflationary pressures boosted by food price increases, as well a moderate growth indicators.