Category: Loans

Leading Brazilian bank Itau Unibanco suffered a sharp rise in non-performing loans in Q1 as a result of the global financial crisis. Loans overdue for more than 60 days and without generation of revenues on the accrual basis amounted to BRL13.4bn at the end of March, up 28% from the end of 2008, when the recently merged entity had BRL10.8bn in NPLs. “During the period, the adverse effects of the international economic/financial crisis spread among a number of industries, thus hurting the demand from, and income of, several economic agents,” says Itau Unibanco. “As a result, the risk associated with credit portfolios has heightened, with the strongest impact being felt on the micro, small and mid-sized companies, as well as individual portfolios,” it adds. For individual customer transactions, the NPL ratio was 9.8% in the quarter, a 170bp increase over the prior quarter. For businesses, meanwhile, the ratio reached 2.5%, up 80bp versus the end of 2008. The overall NPL ratio was 5.6% in Q1, versus 4.8% in the last quarter of 2008. Itau says its expense for “doubtful loans” added up to BRL4.4bn in Q1, up 27.5% from Q4 2008. Itau Unibanco generated Q1 net income of BRL2.0bn, with an annualized return of 18.2% on average equity, down from 27.1% in Q1 2008. Consolidated assets reached BRL618.9bn at the end of Q1. The loan portfolio, including endorsements and sureties, totaled BRL272.7bn, up 25.1% compared to March 31 2008.

Telemar has obtained a $300m loan from China Development Bank, it says. The 7-year facility pays Libor plus 250bp and features a 2-year grace period. The Brazilian telecom, also known as Oi, plans to use proceeds to finance its 2008-2009 investment activity in China with network equipment supplier Huawei. Separately, Moody’s has given an AAA national scale rating to Telemar’s planned BRL3bn bond issue in the Brazil market. The 2011 and 2012 debentures await shareholder approval, which is expected today.

Brazilian meat producer Marfrig has obtained a $75m loan from Bradesco, it says in its earnings report released late Wednesday. The 6-year facility pays Libor plus 725bp. Marfrig is also negotiating a $30m 3-year loan with Rabobank, which it expects to pay Libor plus 700bp. It does not say how it would use proceeds. Brazil’s beef producers have been hit by shrinking export demand and falling domestic prices, with Independencia and Arantes having filed for bankruptcy protection.

Loans from the World Bank to LatAm countries will increase to $14bn by the end of the fiscal year ending in June from around $4.5bn last fiscal year, says Marcelo Giugale, director of economic policy and poverty reduction at the multilateral. In FY 2010 (July-June), he expects LatAm loans to amount to $14bn or even surpass that. Giugale tells LatinFinance that that about a third of the total is in the form of deferred drawdown loans, which allow a country to withdraw funds as needed and not all at once. Giugale says that while funds are not used, the borrower does not pay interest. He adds that the World Bank forecasts zero LatAm growth this year, and warns that this will increase poverty. “In LatAm 6 million people will become poor this year. Of those, 4 million are people in the middle-class who will become poor, and the other 2 million are poor people who were previously seen getting out of poverty,” says Giugale. “It takes 2 years of fast economic growth to lift these people out of poverty,” adds the official.

Mexico-based Telmex is heard in talks with banks to address a $1.3bn August loan maturity. The facility, which was signed in 2006, includes this year’s maturity which has a margin of Libor plus 20.0bp, a $1bn 2011 at Libor plus 25.0bp and a $700m 2013 tranche at 32.5bp. The deal was led by ABN AMRO, BBVA, Calyon, Citi and HSBC. Bankers in the lead group say the company may be considering refinancing at a tenor as short as 1-year. They add that Telmex may also pursue a cheaper, longer-term extension in the bond market. Carlos Slim’s LatAm telecom is likely to experience a more than tenfold increase in pricing. Bankers say Bimbo and US pharma giant Merck are the new investment grade benchmark. Bimbo’s 3-year loan, being syndicated to retail, offers 275bp over Libor, plus retail fees of 125bp for $50m tickets. Merck meanwhile has a new $8.5bn M&A related 1-year facility heard paying 275bp. Few banks are equipped to handle requests that involve a combination of large loans and bonds at the moment. RBS, formerly ABN AMRO, may find it difficult to remain in the lead group following the announcement last week that it will be exiting several business lines and focusing on a narrow client set in strategic markets only. Citi is also heard to be increasingly selective amid trouble globally. HSBC has a firm DCM platform, while BBVA and Santander also appear open to discussing bonds. The three are seen as the likeliest leads for the forthcoming Telmex deal. MLAs on the original facility are BofA, EDC, Santander, ING, Mizuho, SocGen and Scotia, while leads are BTM, Barclays and Sumitomo. Arrangers are BNP and Wachovia, co-arrangers are JPMorgan, Deutsche, Sanpaolo IMI and TD, while managers are Rabobank, Credit Suisse and Dresdner. A Telmex IR official declines to comment.

The IDB has approved a $150m loan to Peru with an amortization period of 20 years, a 5-year grace period and an interest rate based on Libor. Disbursement will be done over a 12-month period, the bank says. The loan will help Peru develop a sustainable energy matrix.

The World Bank has approved a $100m loan for Jamaica. The commitment-linked loan priced over 6-month Libor is payable in 30 years and has a grace period of 5 years. The loan is aimed at supporting a broad program of measures to control public sector balances and debt, as well as enhance tax system efficiency, says the bank.

Mexican steelmaker Ternium has canceled plans to raise $350m in a 5-year amortizing loan. The facility, offered to a group of relationship banks at Libor plus 350bp, was destined for capex and debt amortization. The deal had already garnered 5-6 commitments from banks by the time the company and its leads opted to withdraw, say people close to the process. But as the company’s new projections for the coming year emerged, it became clear that any new financing, including the new loan, would have to be redrawn to reflect expectations of declining output. Instead of asking the market to start a new credit approval process, Ternium opted to pull the loan and free up funds for debt payments by trimming capex for 2009 and selling inventory. Both moves have left the borrower in a comfortable position, say bankers on the deal. Ternium faces some $500m in debt service this year, in large part thanks to an IMSA acquisition facility raised in September 2007, according to the estimates of a lender. The withdrawal of the deal is bad news for Citi and Calyon, the deal’s bookrunners who stood to earn fees for leading the deal. However, bankers maintain that in general clear communication on the decision to withdraw the deal and source debt service cash elsewhere leaves Ternium in good standing with lenders. It may still return to the loan market if conditions stabilize, say bankers. Ternium was not immediately available for comment. Siderar, Ternium’s sister company headquartered in Argentina, also canceled some $1.2bn in capex late last week.

Colombia Movil, operator of the wireless brand Tigo, has secured a $125m loan through its parent, Luxembourg-based Millicom. The 5-year facility through ABN AMRO pays Libor plus 450bp, according to a banker with knowledge of the transaction. Rather than syndicate the deal, ABN has agreed to sell pieces to institutional investors in northern Europe, leveraging Millicom’s status there. With about 10% of Colombia’s wireless market, Colombia Movil will use funds to continue expanding its network. The telecom secured $600m in loans from the IDB last year. Millicom bought Colombia Movil for $479m in 2006. In October, ABN joint led with Standard Bank a $200m bridge loan to help fund the $510m acquisition of El Salvador-based cable provider Amnet.

Peruvian miner Milpo is out with a $130m loan to help it pay for a 70% stake in Minera Atacocha. The 5-year final, 3-year average life facility pays Libor plus 425bp, and is being marketed to a limited group of banks that will form a club-like consortium to help get the deal printed by year-end, say people close to the process. The transaction is heard gaining traction with two commitments already and as many more expected by next week. Market participants away from the deal who are seeking a new benchmark for time sensitive loan syndications are watching the deal. At first blush, the pricing at Libor plus 452bp appears high, especially given the tight structure: low leverage of around 1x, a stringent covenant package, and a senior secured facility backed by export receivables. But bankers both on and away from the transaction acknowledge that in today’s market, loans needing to get done must pay up for liquidity. Some international banks are heard funding themselves at more than Libor plus 150bp. Credit Suisse, which advised Brazil’s Grupo Votorantim on its cross border bid for a 30% stake in Milpo earlier this year, parlayed its initial role into a financing mandate and is leading the deal. Voto is Milpo’s largest shareholder.