Changes announced last week by Colombian regulators to rules governing pension funds are likely to have only a gradual impact, owing to strength in domestic markets. The Superintendencia Financiera announced last week a long-awaited increase in equity investment limits – to 40% from 30% – and on investment in international securities, to 40% from 20%. “This is a very good sign,” Felipe Gaviria, VP in asset management at Santander Colombia, tells LatinFinance. “It’s always good to be able to expand your portfolio. However, the impact will be minimal at first.” Gaviria explains that attractive prices in local bonds and equities will prevent pension fund managers selling significant amounts to buy foreign securities. In the long term, though, there will likely be some increase in international assets. Investment of up to 5% in local and offshore private equity funds is also now permitted, subject to certain rules. Although pension funds may invest in infrastructure projects – which Gaviria says are a good long-term investment – via PE, he would like them to be able to make direct equity investments.
Category: Corporate & Sovereign Strategy
Peru Rocket Takes Off
Peruvian President Alan García is a man on a mission, calling for revolutions to transform the country. Investors adore the credit, but there are nagging concerns.
by Lucien Chauvin and James Crombie
Cuban Debt Unchanged by Castro News
Cuban debt was unruffled by a change in power over the weekend, though some investors are hopeful of progress under Raul Castro. For medium term Deutschemark defaulted debt, UK-based boutique Exotix was showing a bid-ask of 15-17, unchanged from last week. A new Castro regime could provide the first steps towards democratization, leading to an end in the US embargo, optimists say. “Now that Raul has taken charge, there is a possibility for change,” says Thomas Herzfeld, a Miami-based investor who created the Caribbean Basin Fund. The $30m closed-end entity invests in companies around the Caribbean that should benefit from an end to the embargo. “My personal view is that within the next year or two the embargo will be history,” Herzfeld says.
Fitch Upgrades Telefonica Argentina
Fitch has upgraded Telefonica de Argentina’s (TASA) local currency issuer default rating to BB from BB minus. The agency also upgraded the company’s national scale rating to AA+ from AA minus, and raised approximately $474 million in local bonds a BB minus from B+. Fitch affirmed the company’s foreign currency rating at B+. “TASA’s rating actions reflect stronger financial profile, solid business position in the Argentine telecom sector, healthy cash flow generation and a manageable debt maturity profile,” says the agency. “The ratings incorporate a level of implicit support from controlling shareholder Spain’s Telefonica, which has provided flexibility in the form of intercompany loans in previous years.” Of risk to TASA’s ratings are currency mismatch between revenues and indebtedness, regulatory risk and increased competition from wireless services.
Petrobras Tops Sustainability Survey
Petrobras is the world’s most sustainable oil and gas company, according to Management & Excellence’s (M&E) annual oil and gas ranking. Mexican giant Pemex ranked 12th while Venezuela’s PDVSA ranked 20th. The survey measures oil and gas companies’ compliance with 387 accepted international standards in sustainability, corporate governance, social responsibility, ethics and transparency. M&E noted that companies with the poorest governance and sustainability practices, such as PDVSA, generally control the largest oil and gas reserves. The firm attributed Petrobras’ solid ranking to its reinsertion into the Dow Jones Sustainability Index, the independence of its board of directors and the success of its “Zero Hunger” program in Brazil.
GMexico Vows to Save Asarco
Grupo Mexico issued a statement Wednesday rejecting a proposal for auction of the assets of its mining unit Asarco by its independent board, filed in a bankruptcy court in the US. “GMexico believes that Asarco has proven its capacity to generate enough cashflow to completely pay all of its creditors and maintain considerable value for its stockholders,” the company says. Asarco had approximate net sales of $1.68bn, $550m Ebitda and a net profit of over $330m in 2007, numbers that according to GMexico “reflect the solvency and liquidity of Asarco to pay its debts once they are determined and defined.” GMexico says it is doing everything possible to regain control of the board and bring Asarco out of bankruptcy proceedings.
Homex to Target Foreign Tourists
Mexican housing developer Homex is preparing to enter a new line of business in Mexico, Gerardo de Nicolas Gutierrez, CEO, tells LatinFinance. “We have just launched a new program to build second homes for foreigners in Los Cabos, Puerto Vallarta and Cancun,” said Gutierrez. Homex, the country’s largest developer and the only homebuilder that is traded in New York, is known for building houses that fall within two general price ranges: $18,000-$60,000 houses and $60,000-$300,000 ones. The new initiative will focus on houses worth $200,000-$600,000, and will be largely financed with existing cashflow, says the CEO. The company will work with Mexican banks such as BBVA Bancomer, Banorte and Banamex to develop mortgage products for the foreigners that can be denominated in pesos or dollars. “The number of foreigners coming to Mexico is growing every year, with a large part in the post-retirement stage,” says Gutierrez.
Moody’s Predicts Default Rate Rise
Moody’s says the global speculative-grade default rate will rise sharply to 4.6% by the end of this year and increase further to 4.8% by January 2009. The long-term average is 4.5% since 1983. The rate rose to 1.1% at the end of January, up from a closing level of 0.9% for 2007. “The recent increase comes off of a two-decade record low level reached in November 2007, when the speculative-grade default rate came in just below 0.9%,” says the agency. “Importantly, the model’s baseline forecast does not assume a US recession. If a significant recession were to occur, default rates could reach over 10% as they have in previous recessions,” says Moody’s director of corporate default research Kenneth Emery. Last year saw a spike in junk LatAm corporate issuance and a rise in the default rate will likely affect pricing. In an extreme scenario, more speculative names could be shut out of debt markets completely.
Usiminas Buys Mining Assets for $1.85bn
Brazilian steel company Usiminas has agreed to purchase three mining operations in Brazil for a total of $1.85bn, say people close to the deal. The company told the CVM over the weekend it bought J. Mendes, Somisa and Global Mineraçao for an initial payment of $925m. The deal includes an earnout agreement whereby Usiminas will pay an additional $925 based on the performance of the assets. Credit Suisse advised J. Mendes on the sale of the asset. Separately, Usiminas is heard to have just hired investment banks to arrange a syndicated loan.
Fitch Upgrades IIRSA to B+
Fitch has upgraded the foreign currency issuer default rating on IIRSA to B+ (stable) from B, including $150m in notes due 2017. The agency praises the issuer’s improvements in cash flow generation and successful financings that have boosted the debt profile and cut refinancing risk. “IRSA’s credit ratings are supported by its strong business position in the Argentine real estate market,” says Fitch. Through its subsidiary APSA (61.5% owned), IRSA has a 60% share of the shopping center market in Buenos Aires. APSA also owns and operates five additional malls outside BA, says the agency. IRSA had $435m in debt as of September 30, says Fitch. Besides the 2017, there is a $120m bond issued by APSA in 2007 that matures in 2017 and a $50m ARP-linked bond issued by APSA that amortizes between 2009 and 2012.