Category: Loans

Mexico’s Banorte has joined as a bookrunner the $3.1bn equivalent 7-year peso acquisition facility for FARAC, skipping the MLA tier altogether. Santander, NordLB and Dexia, the original three bookrunners, are looking for MLA participation and have up to 15 banks considering taking the $300m tickets. Banorte’s move to take a bookrunner-sized participation is evidence that there’s strong enthusiasm from locals to participate. It may also mean that prospective MLAs are hesitating to take on the all-peso risk. The MLA deadline is today, Friday, though a handful more are expected to join the group in the first half of next week.

Baja Mining mandated Unicredit to lead a $475m 12-year term loan facility and $40m cost overrun facility. The term loan is will pay in the 150bp over Libor range, according to bankers away from the deal. Proceeds will be used to partly finance the development of Baja’s El Boleo project in Baja California Sur, Mexico. While mining deals have been well received by the market, there have been virtually no Mexican loans in the sector in the past two years.

Gerdau’s tier of MLAs for a $2.75bn syndication is growing, with bankers saying the financing is enjoying strong interest from a number of prospective lenders. Lead banks JPMorgan, ABN AMRO and HSBC have accepted participation from Standard Chartered, Sumitomo and Banco do Brasil, in addition to the previously reported Tokyo Mitsubishi and BBVA. Tickets are $300m apiece for participation in the 3-tranche financing that includes a 5-year trade related piece at Libor plus 100bp, a 6-year trade piece at Libor plus 125bp and a 5-year working capital facility at the same spread. The deal is the first major syndication to be launched following the credit downturn, and bankers say pricing is attractive, given the quality of the credit.

Mexico’s Banco Inbursa is the first MLA to join the group of lenders to the first FARAC project, being run by ICA and Goldman Sachs Infrastructure Partners (GSIP), say executives close to the process. The bank signed up for a ticket of $300m equivalent in pesos, and is expected to be followed by up to three more banks by the close of business Wednesday. The $3.1bn 7-year acquisition facility is pushing the limits of peso-denominated lending in Mexico, forcing foreign banks to come up with innovative ways of obtaining the necessary funds to participate. Domestic banks with sufficient balance sheet are naturally leading candidates for participation. Leads on the syndication Santander, Dexia and NordLB are hopeful they will get enough MLAs to be able to reduce participants’ holds closer to $200m.

Bank of Tokyo Mitsubishi has joined BBVA as an MLA on a $2.75bn loan for Gerdau is taking out to acquire US competitor Chaparral Steel. The Brazilian steelmaker has hired JPMorgan, ABN AMRO and HSBC as joint book runners, and is looking to lure MLAs with $300m tickets to participate in the 3-tranche financing. It includes a 5-year trade related piece at Libor plus 100bp, a 6-year trade piece at Libor plus 125bp and a 5-year working capital facility at the same spread, according to people familiar with the transaction. It will go to general syndication as early as the week of September 17. Gerdau’s is the first large LatAm loan to be launched since the July-August sell-off, and the pricing on the deal reflects the new, less certain financing environment, say bankers. At BBB minus, Gerdau is rated just one notch below CVRD (BBB), but it is paying close to 40bp more on a trade-related facility that is half the size of the one taken out by the Brazilian mining concern less than a year ago. Brazilian steel is in the spotlight following rumors that CVRD would make a joint bid with BHP Billiton for fellow miner Rio Tinto. A deal, which would be the biggest in the sector’s history, would likely face both credit and regulatory hurdles. It would also propel the Brazilian firm to the top of the global commodities business.

BBVA has signed on as an MLA for Gerdau’s $2.75bn loan being taken out by its US unit to acquire Chaparral Steel. It is the first bank to join the three joint bookrunners – JPMorgan, HSBC and ABN AMRO – in the three-tranche financing. MLA tickets are $300m apiece, and the earlybird deadline for MLAs is Monday. The financing is heard to include a 5-year trade related piece at Libor plus 100bp, a 6-year trade related piece at Libor plus 125bp and a 5-year working capital facility also at Libor plus 125bp, according to people familiar with the transaction. One tranche is heard with a 50bp commitment fee. Gerdau’s is the first large LatAm loan to be launched since the July-August sell-off, and the pricing on the deal reflects the new, less certain financing environment, say bankers. At BBB minus, Gerdau is rated just one notch below CVRD (BBB), but it is paying close to 40bp more on a trade-related facility that is half the size of the one taken out by the Brazilian mining concern less than a year ago.

WestLB is assembling a group of MLAs to provide some $1bn in construction financing for Empresas ICA’s 750MW hydroelectric project in Mexico’s Nayarit and Jalisco states. The Comisión Federal de Electricidad announced last month that ICA submitted the lowest bid, and is expected to confirm the award as soon as this week, following a technical review. HSBC, NordLB, Banco Santander, BBVA and Citi have been invited to join the 4.5-year loan.

Syndications for Waldo’s, a Mexican discount retailer, are heard to be nearly complete, according to bankers close to the deals. Waldo’s is raising $120m in a two tranche loan – a $70m 5-year A-tranche at 450bp over Libor, and a second lien $50m B-tranche at 750bp over. The two tranches were flexed up by 50bp and 100bp respectively three weeks ago, reflecting participants’ wariness on participating in a highly levered transaction. The book is now heard to be practically full, with a few signings pending. Bankers away from the deal were skeptical about whether it would succeed given its highly levered nature and the fact some of the proceeds will repay a private equity sponsor. Elsewhere in loans, Cydsa, an exporter of chemicals and materials based in Monterrey, is heard close to wrapping up a $150m refinancing through a limited syndication. Citi has books on both deals.

Pricing is out on a $3bn equivalent in Mexican pesos loan for the FARAC toll road. The biggest local currency syndication to date is a 7-year stepping up from 165bp over Libor in year one to 185bp in years two and three, 200bp in years four and five, and 225bp in years six and seven, say people familiar with the issue. Santander underwrote the deal and is leading syndication while joint-bookrunners Dexia and NordLB have committed to $500m each. MLAs are being asked to purchase tickets of $300m for an up-front fee of 100bp and a 10bp underwriting fee. The loan is heard to have no rating, following speculation that it would be high grade to sell to domestic pension funds. Bank market participants say the transaction, which will set a benchmark for the next toll road financing, is well structured. But there is some concern about the feasibility of such a large volume, understood to be the biggest project deal in LatAm to date. Participating banks may struggle to obtain the pesos necessary to commit to the tickets, say bankers away from the deal. And this is just the first of at least five such auctions that will surely involve similar financing structures, meaning banks will look to keep some dry powder. The bank meeting in New York Thursday was heard well attended, following launch Tuesday in Mexico City. ICA and Goldman Sachs Infrastructure Partners are running the toll road project.

In the ongoing EM turbulence, Merrill Lynch says cash – with Libor at 5.5% – will outperform bonds and it sees opportunities to sell on strength. “At the long end, we would recommend selling bonds. However, in the intermediates, we would recommend buying protection, as it is likely to widen and the CDS-to-bond basis should also widen as the market deteriorates further,” says Merrill. It compares the current turmoil to 1998, but says this time round, EM is more of a bystander, with balance sheets and cash-flow positions in much better shape. At the weak end of the spectrum lies Argentina, where investor perception is deteriorating on concerns about remaining financial needs, inflation reporting and fiscal slippage. “Furthermore, the country has been unable to secure a solid investor base, as its new bonds are not part of the major indices (they are issued under local law),” says Merrill. Based on liquidity (FX reserve position, external debt service indicators, covered versus uncovered financial needs) and solvency (public debt/GDP, CA positions), Mexico is in a strong position, it adds. However, its relative strength would change if the mortgage crisis in the US ends in a full blown recession, given linkages between Mexican manufacturing and the US industrial sector, says Merrill. “This situation would be less of a concern for the case of Brazil, for instance, where exports are well diversified and where there is less of a direct impact from the US real economy,” the shop adds.