Colombia saw its sovereign credit rating upgraded to Baa3 from Ba1 by Moody’s, the second investment grade rating for the sovereign after S&P made the move in March. Fitch has the sovereign on a positive outlook. Moody’s cites Colombia’s proven ability to deal with internal and external shocks, and steady reductions in the threat posed by guerrilla groups and organized crime. “The country’s institutional framework is well placed to deal with an expected commodities-driven revenue increase in coming years,” according to the agency. General government debt-to-GDP has stabilized at around 37% after falling 10% from 2003 to 2007, comparing favorably with other Baa-rated sovereigns. Colombia has also shown median GDP growth in the last decade higher than the Baa average. According to a ratings note by RBC, the move came earlier than the market had expected. RBC says the move “will open up the country to a potentially much wider pool of foreign institutional investors, who in many cases require at least 2 rating agencies to rate a country IG before they can allocate money there.” The bank says the move will lower funding costs for the sovereign and local corporates and increase portfolio investment. Goldman Sachs says it expects Fitch to follow suit soon, likely after the approval of fiscal reforms currently being debated in Congress.
Category: Economy & Policy
Mexico Airport Group Gets Loan
Grupo Aeropotuario del Pacifico has received a 7-year MXP1.02bn ($88m) credit line at TIIE+165bp from HSBC, according to a stock exchange announcement. The fee for structuring the loan is 100bp and the cost for commitment of funds is 30bp in 2011 and 40bp in 2012. The loan will help finance capital investments in 2011 and 2012 for the Guadalajara, Puerto Vallarta, Los Cabos, Hermosillo and Guanajuato airports, which it operates.
Banxico Keeps Rates Steady
Mexico’s central bank kept its rate steady at 4.5%, in-line with consensus estimates. Citi cites improving outlook for inflation risk and economic slackness as reasons for the bank not hiking rates. Citi says it expects the first rate hike to take place in October. Credit Suisse, meanwhile, says it believes Mexico will not increase its rate until December, while Barclays expects that it will wait until January 2012.
Colombia Raises Rate
Colombia’s central bank raised its rate Monday by 25bp to 4.00%, inline with market expectations. According to Credit Suisse, inflation has come in below expectations and expects the bank to end the year with a 5.00% rate. Citi says the bank will continue to raise rates as part of its monetary policy normalization scheme.
Banxico Expected to Keep Rates Steady
Mexico’s central bank is widely expected to keep its rate unchanged at 4.5%. Goldman Sachs cites benign inflation data and recent correction in commodity prices as influencing the bank’s thinking.
EM CDS Volumes Increases in 2011
Trading in EM CDS rose to $306bn in Q1 2011, up from $208bn in Q4 2010, representing a 47% increase, according to EMTA. However, this was a 23% decrease from Q1 2010, when EM CDS volume was $397bn, says EMTA. The most frequently traded sovereign contract was the Brazilian CDS, at $48bn. Turkish government CDS trading totaled $36bn, while Mexican sovereign CDS contracts came to $32bn. The most frequently traded corporate CDS contracts were those for Gazprom ($8n). Pemex’s CDS volume was $2bn, while Petrobras’ CDS trades were for $1bn.
EM Ratings Stabilize: Fitch
Emerging Market corporate ratings have normalized in the wake of the impact of the global financial crisis, according to a Fitch report. The ratings agency, in a report titled “Mid-Year Emerging-Market Corporate Outlook 2011,” says it is forecasting 5.5% GDP growth for EM in 2011, and 5.7% GDP growth in 2012, versus global GDP growth of 3.2% in 2011 and 3.3% in 2012. Growth expectations for EM corporates broadly reflect the prospects for global GDP development over the next two years, the agency says. EM and developed market corporate ratings are continuing to converge, according to the report, although LatAm remains constrained by limited scale and diversification, weak financial profiles and corporate governance. Aggregate EM corporate cross-border issuance rose to $309bn last year from $136bn in 2006, although sovereign ($566bn) and EM financial institution ($671bn) continue to dominate. Corporate issuers are being attracted to the global markets by the opportunity to diversify funding and achieve longer tenors. EM corporate issuance is roughly even broken down between LatAm, MEA and CEE, with Brazil and Mexico leading the region for corporate cross-border issuance. EM syndicated lending peaked at $442bn in 2007, and rose only to $263b in 2010. LatAm has not been a significant destination for syndicated lending, accounting for only 9% of the 2010 total, according to Fitch.
Mexico Airport Bids Rejected
The Mexican ministry of communication and transport declared void bids for the concession to build and operate the Riviera Maya airport in Tulum, it said in a statement on its website. The ministry said that the reason was because none of the three proposals complied with the general bidding requirements. It added that it is yet to evaluate when it will be convenient to carry out another bidding process.
Financiera Independencia Issues MXP1.5bn
Mexican microfinance lender Financiera Independencia has priced MXP1.5bn in 3-year bonds, after the deal was 1.3x oversubscribed, according to a banker on the deal. The bond pays interest at TIIE+ 265bp, coming wide to TIIE+ 250bp-260bp guidance. Pension funds and mutual funds were among the biggest investors, he adds. The proceeds will be used in part to repay an MXP784m bond expiring in June, with the remainder going towards increasing the bank’s lending portfolio and for working capital. Actinver was the sole bookrunner on the sale, rated A on a national scale. The last time Independencia came to the domestic market was in 2008, when it issued the bond maturing in June. In March 2010, it issued $200m in 10.0% 2015 bonds in the dollar market.
Gas Natural Bond to Price Today
Gas Natural Mexico is today expected to price up to MXP4.5bn in a dual tranche deal, according to market participants. Guidance for a 4-year floating rate tranche is for TIIE+ 40bp-50bp, according to a report by Scotia Capital, while a 7-year fixed rate tranche is Mbonos+ 140bp+150bp. Mexican bond investors looking to diversify their exposure within the energy sector have expressed significant interest in the transaction from the subsidiary of Spain’s Gas Natural as a way to diversify their holdings. Proceeds will be used primarily for debt refinancing purposes. Banamex, BBVA Bancomer, HSBC, ING and Santander are managing the deal, rated AAA on a national scale.