Sovereign restructurings have become much less frequent and more efficient. But they have not gone away, and the ubiquitous CDS may produce some nasty surprises.
by Lee C. Buchheit*
Category: Corporate & Sovereign Strategy
Posted inDaily Brief
Brazil’s TAM Appoints New Board Members
Shareholder Marcos Adolfo Tadeu Senamo Amaro and Alexandre Goncalves Silva, former CEO of General Electric in Brazil, were elected to the board of directors of Brazilian airline TAM at its ordinary general assembly. There were no other changes to the board, TAM says.
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Fitch Cuts Durango to B Minus
Fitch has chopped Mexico’s Corporacion Durango to B minus from B and its 2017 notes B/RR3 from B+/RR3, implying a 51%-70% recovery in the event of default. The ratings remain on rating watch negative and Fitch notes a deterioration in business and financial profile during the 12 months to March 31. “Durango is facing financial pressure due to rising input costs for old corrugated containers (OCC), a key raw material; OCC prices have escalated during the past 12 months due to the aggressive purchases of OCC in the US by the Chinese,” says Fitch. Durango has also been hurt by rising energy costs, it adds. “The increase in these two costs, plus other factors, have led to a rise in the company’s per-ton unit cost to $583 for the quarter ended March 31, 2008 from $506 during the same quarter in 2007. Price increases have not offset these costs increases,” says Fitch. The firm has $14m in short-term debt and $524m in long-term obligations.
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Caribbean Exchange Linkup Delayed
The launch of the Caribbean Exchange Network, which connects the exchanges of Barbados, Jamaica and Trinidad and Tobago, has been delayed by several months, Marlon Yarde, CEO and general manager of the Barbados Stock Exchange tells LatinFinance. An original launch date was set for this month, but members are now shooting for the end of Q3. The exchanges submitted a proposal for the linkup to their respective regulators and since then, very little has happened, says Yarde. The joint platform would bring a much needed critical mass to markets in the area, encouraging “more activity in the markets, improved liquidity, better prices and more opportunity for investors to create wealth,” says Yarde. A second phase of implementation would allow the exchange to create an international gateway to facilitate trading from institutional investors, and also incorporate other Caribbean exchanges, he says.
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Fitch Upgrades Uruguay’s NBC
Fitch has upgraded Uruguay’s Nuevo Banco Comercial’s (NBC) foreign currency long-term issuer default rating to BB minus from B+ and to AA(ury) from AA-(ury) on the local scale, with a positive outlook. In addition, Fitch affirmed the local currency long-term IDR at BB minus. The upgrade reflects the bank’s improving operating performance. The agency expects NBC’s operating performance to continue to improve, although its net income could be affected again by variations in the exchange rate. NBC is the second-largest private bank in Uruguay. It had 16.9% of the system’s assets at the end of 2007, Fitch says.
Posted inDaily Brief
HSBC Mexico Taps Banorte’s Pena
Luis Pena, who stepped down Tuesday as CEO of Mexico’s Banorte, has been named CEO of HSBC Mexico. Pena replaces Paul Thurston, who will return in May to the UK to run retail and commercial operations. Thurston also served as co-head of LatAm with HSBC Brazil CEO Emilson Alonso, who will in May be promoted to sole head. Shaun Wallis will take over from Alonso as Brazil CEO.
Posted inDaily Brief
Banorte CEO Resigns
Luis Pena, CEO of Mexico’s Grupo Financiero Banorte, resigned from his position, the bank said Monday. Banorte did not give a reason for the resignation. Pena joined the institution, one of Mexico’s last big banks owned by local investors, as chief executive in 2004, and has overseen a period of expansion in Mexico and the US. Alejandro Valenzuela, head of treasury and capital markets, has been named interim CEO. Banorte gave no details regarding permanent plans for replacing Pena.
Posted inDaily Brief
Pactual Sale Gains Big Adherent
A rumored initiative to have UBS sell its Pactual investment banking unit just got a significant boost from an unexpected party. On Thursday, Luqman Arnold, a former CEO of UBS ousted in 2001 and whose fund today owns a $450m stake in the bank, sent UBS top brass a letter calling for major changes at the firm, including a sale of Pactual. Separate from Arnold’s public proposal, an internal movement headed by former partners of Pactual to buy back the shop is rumored to have been underway for months. And Andre Esteves, the former CEO of Pactual who was elevated to head UBS’ fixed income and currencies division out of London, was also heard to have proposed a Pactual buyback to the Swiss bank’s top managers – a surprising move given the fact that he spearheaded the sale in 2006. Local bankers away from UBS say he was joined by Jorge Paulo Lemann, the billionaire founder of GP Investments, in an offer for the shop he ran for years in Rio. UBS denied Esteves is in talks to buy back Pactual and maintains it wants to keep the Brazil unit, which garnered significant profit in 2007.
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Fitch Affirms Brazil’s ISA, Chile’s LAN
Fitch has affirmed ISA Capital do Brasil foreign and local currency issuer default ratings at BB (stable). The rating action applies to $554m in outstanding senior secured notes. Ratings are based on the strong credit quality of CTEEP, its sole revenue source and only operating asset. “Although CTEEP’s credit quality is strong, ISA Capital’s credit quality is somewhat weaker given that ISA only owns 37.5% of CTEEP total capital and does not receive the full benefits of operating cash flow,” the agency says. Going forward, ISA Capital is expected to increase its cash reserves by approximately BRL100m per year during the next four years in order to cover the amortization of the notes due 2012. Fitch also affirmed the foreign currency issuer default rating (IDR) of Chile’s LAN Airlines at BBB. The agency also affirms LAN’s $40m ticket receivables series 2002 due 2009 at BBB. The outlook on all is stable. The action reflects a strong business position, low cost structure, fleet flexibility and adequate financial profile of the airline, the agency says.
Posted inDaily Brief
Medina Mora Keeps LatAm After Citi Shuffle
Manuel Medina Mora will continue to lead Citi’s Mexico and Latin America operations following a comprehensive global reshuffle. According to Citi CEO Vikram Pandit, the reorganization will allow the bank to focus resources on growth in emerging and developed markets and improve efficiencies. “Citi has established a regional structure to bring decision-making closer to clients. It is empowering the leaders of the geographic regions with the authority to make decisions on the ground,” says the bank, which is under pressure after significant mortgage-related losses. Medina will report directly to Pandit, as will the heads of the following units: Asia Pacific, including Japan; Western Europe, Middle East and Africa; and Central and Eastern Europe. Citi has also reorganized its consumer group into two global businesses – consumer banking and global cards. It will also further centralize global functions, including finance, IT, legal, human resources, and branding.