Mexican conglomerate Alfa is understood to have mandated a syndicated loan to back the $600m purchase of Eastman Chemical assets in the US. A $600m 3-year bullet facility is expected to be syndicated next month. Credit Suisse and HSBC are heard as the leads on the deal that hits a LatAm bank market starved for assets and hungry for yield. The purchase of Eastman’s polyethylene terephthalate resins business and related assets and technology of its Performance Polymers segment was done by Alfa unit DAK Americas. BAML advised Eastman while HSBC is understood to have worked on the buyside. Fitch Wednesday downgraded Alfa sub Grupo Petrotemex to BB (stable) from BB+, including notes issued by DAK, amid fears over leverage incurred in the purchase. On a pro forma basis, Fitch estimates that Petrotemex’s total debt-to-Ebitda, considering 12 months of Eastman assets operations, could reach 3.3x in 2010 and gradually decrease. This compares negatively with a total debt-to- Ebitda ratio of 2.2x for the 12 months to June 30, and fall outside Fitch’s prior leverage estimation of 2.0x to 2.5x. Nonetheless, Fitch notes that the investment is strategic and positive for Petrotemex, and should strengthen its business position, as it gains PET market share in North America. “It should also bring potential synergies to Petrotemex’s operations, provide the company with access to new technologies and improve its vertical integration,” says Fitch.
Category: Loans
DomRep Gets IMF Disbursement
The IMF says it has completed a second and third review of the stand-by arrangement (SBA) with the Dominican Republic and approved a $249m disbursement. Up to now, total disbursements total about $688m. The SBA was initially approved on November 9 for a total of $1.7bn and the IMF says all benchmarks for the second and third reviews were met. The IMF says the 2011 budget envisages a consolidated fiscal deficit of 3% of GDP, a 1% drop, to be achieved through a reduction in indiscriminate electricity subsidies and a strengthening of tax collections by rationalizing tax exemptions and improving tax administration, targets that are in line with the original program.
Lenders Await Pemex Allocations
Bankers are keenly awaiting this week’s allocations on a Pemex $3.25bn dual-tranche loan. It has apparently received over $4bn worth of commitments from 15 banks, not including the leads, a fact that raises some eyebrows. “They are asking for pretty big tickets for tight pricing,” says a banker not on the deal. “It’s not that far from where banks have their own funding costs,” he adds. The deadline for commitments was 2 weeks ago. Sizeable tickets received include $250m from Sumitomo across both tranches, $150m from Intesa on the 5 year tranche, and $75m from EDC to the 3 year, according to market participants. The 3 year tranche is a $1.25bn revolver to replace a 2007 loan that matured in September that had been priced at 25bp+Libor, for which it is offering 125bp over Libor. Fees for participation in the range from 25bp-60bp for $100m, $75m, $50m and $35m tickets. Bookrunners on the tranche are Barclays, BBVA, Credit Agricole (admin agent) and RBS. Pemex also wants a new money 5 year term loan for $2bn at L+150bp. BBVA (admin agent), BNP Paribas, Credit Agricole, Citi, HSBC and Inbursa are bookrunners. Fees on the term loan range from 45bp to 85bp for $150m, $100m, $75m and $50m commitments.
CFE Looks to Syndicated Loan Market
Mexico’s CFE is looking to raise a syndicated loan, according to market participants, who expect it to be pre-funding for 2011. Mexico’s electricity commission has a $605m loan maturing January 19, according to Dealogic. BBVA, Santander, Credit Agricole, Citi, BNP Paribas and SG were leads on the original transaction, which took place in July 2007. Francisco Santoyo, CFO at CFE, told LatinFinance in September that the company would look to pre-fund for 2011 in order to cushion itself against potential external shocks.
Odebrecht Wins Reverse Flex on Loan
Brazil’s Odebrecht has completed a 20bp reverse flex on a $1.1bn 12-year loan to finance construction of 2 oil platforms, according to bankers familiar with the transaction. After receiving $2bn in demand on commitments from 19 banks when it closed last week, pricing fell to 255bp over Libor from 275bp for years 1 through 6. It was also cut, to 280bp from 300bp over Libor, for years 7-12. Bankers expect most of the institutions that had expressed interest to participate, despite slimmer returns. The loan consists of a $220m ECA tranche, while Odebrecht will seek MLAs to build an $860m commercial bank syndicate. Fees for MLAs were said to be 200bp. BNP and HSBC are leading the transaction.
BicBanco Signs A/B Loan
BicBanco last week closed an approximately $206m IFC A/B loan to support access to finance for small and medium sized enterprises in Brazil. What the IFC says is its largest syndication for a financial institution in LatAm includes a $25m 5-year A loan. The B loan is divided into 4 tranches consisting of 2 euro loans and 2 dollar loans, with a 2 and 3-year tranche in each currency. The dollar loans consisted of a $25m 2-year loan and a $106m 3 year loan, and the euro tranches are for 2 years for EUR5m and 3 years for EUR30m. The 2-year priced at Libor plus 2.1% and Euribor plus 1.6%, the 3 year was at Libor plus 2.55% and Euribor plus 2.05%. The deal was 40% oversubscribed, says IFC. Banco Itau Europa, Commerzbank, IFC and Standard Chartered were coordinators and bookrunners, with HSBC and Citi also as bookrunners. Commitments were received from Banca Monte Dei Paschi di Siena, ING bank, Oberbank, Santander, Standard Bank, JPMorgan, Bank of America, Israel Discount Bank and LBBW. “IFC has mobilized through its B loan program $1.1bn from international banks to Brazilian midsize banks in the past 3 years, making a significant impact in the banking industry and in its SME clients,” says Stefania Berla, global head of syndications at the IFC. Mauricio Mora, syndications officer at IFC, tells LatinFinance that he expects the multilateral to increase lending to LatAm midsized banks, in particular Brazil and Peru, in 2011.
Lenders Predict Loan Market Boost
Bankers are optimistic that the syndicated loans market will pick up in 2011, after agreeing that the attractiveness of the bond market has impacted the loans market this year. “There is a technical imbalance and there is not enough loan demand as the bond market is so healthy,” says Chris O’Neill, svp at Bank of Tokyo Mitsubishi UFJ, adding that it is a borrower’s market. In Mexico, for example, 40 banks compete for a few top tier borrowers, creating pricing pressure not in the US, say market participants. However, LatAm is considered essential to financial institutions. Santander expects 40% of 2010 profit to come from LatAm, says Marcia Vorona, executive director of structured finance at the Spanish bank. Bankers expect to seen an increase in loan activity in oil and gas, particularly in Brazil where it is needed to fund drill ship construction, and in the petrochemicals, metals and mining. Acquisition finance in Brazil, Chile and Peru is also expected. Bankers expect tenors to grow to 3-5 years. “We can also expect to see more Asian banks, in particular from China, participating in transactions,” adds Vorona. The role of multilaterals is also expected to change. “Three years ago there were large projects that would not work without multilaterals. Now this is not the case, so I expect there to be a shift in their focus, to widening access to the global market,” says O’Neill. There is also strong demand for the transactions that do come to market. “There is really a lot of appetite and people do not want their tickets to be reduced, as there is a lack of good assets,” adds Vorona. Ernesto Meyer, head of LatAm syndicated loans at BNP Paribas, adds that international banks trying to boost LatAm exposure use syndicated loans to cross-sell other financial services, in order to catch up with local banks. Although syndicated loans may not be as cheap as the current bond market, issuers should still consider them, say lenders. “By going to the loans market borrowers will
Mexican Lender Clinches Credit
Crediamigo, a payroll discount lender specializing in loans to government employees, has signed a MXP731m loan secured by its credit portfolio. “This is almost a privately placed securitization, and the next step should be a public securitization,” CEO Bernardo Paasche tells LatinFinance. He notes that the lender will need more funds, as it expects 100% loan portfolio growth during 2011. The 3.5-year facility pays a spread over TIIE which Paasche declines to disclose. Deutsche Bank took a MXP620m senior portion of the deal, while US-Based Alsis Funds took a MXP110m subordinated piece which pays a higher spread over TIIE. There are no specific plans for a public ABS yet, Paasche says. As of September, the Sofom had a total loan portfolio of over MXP900m, with over 40,000 clients.
Correction: BNP Appoints New Loans Head
An October 21 Daily Brief entitled “BNP Appoints New Loans Head” incorrectly portrays the nature of the move. A corrected version follows:
Sarah Saint-Amand has left her role as vp in BNP Paribas’ loan syndications group, according to a spokesperson for the bank. She will be replaced by Kristie Pellechia, who has been in the bank’s restructuring division for the past two years. Ernesto Meyer remains head of loan syndication, but has relocated from Sao Paulo to New York.
M&A Fees Lag Volume Surge
The M&A fee pool fails to keep up with a significant increase in transaction volume this year, suggesting some league table-focused banks are doing business at discount prices. In the year to October 21, M&A deal volume booked by advisors reached $205bn from 1,047 deals, up 185% from $72bn (675 deals) in the corresponding period of 2009. M&A revenue, however, has risen just 27% year-on-year, to $500m YTD. “It’s a global trend in all products,” says the head of LatAm investment banking at a major institution. “There are lots of new entrants offering services to get market share,” he adds. Even excluding large trades like Slim’s telecoms consolidation, or a fairness opinion on Petrobras’ jumbo equity – both stretching the meaning of “advisory” – volume is still a hefty $134bn YTD. “It’s got to be people doing work for free, or almost free,” says a banker focused on international markets. “I don’t think fee levels have gone down.” The banker says divergence is likely the result of banks doing cheap fairness opinions. Merging entities often arrange a pact themselves without the aid of advisors, since they’re already very familiar with the target. They may bring an advisor in at the end just to finalize terms, but the fee would be lower, since internal teams do all heavy lifting. “There is a pretty substantial number of deals either arranged without advisors at all, or mostly without advisors, and maybe they brought somebody in for a final analysis,” says a LatAm M&A specialist. He refers to Vale’s sale of various mining assets to Norsk Hydro for $4.9bn, in which the vendor did not use banks, as an example. Norsk Hydro retained Citi and Credit Suisse on that deal. Most surprisingly this month, Barclays is number 4 by M&A volume, claiming credit for 7 deals worth a combined $46bn, much of it a fairness opinion on Petrobras’ $42.6bn oil-for-shares swap. Rothschild also makes a surprise appearance at number 2, also propelled by Brazilian oil.