Category: M&A

HSBC declined to comment on rumors that it is working on an acquisition of Guatemala’s G&T Continental. After its $1.77bn all-cash purchase of Panama’s Banistmo in September 2006, HSBC has become a significant force in Central America, alongside Citi, which bought El Salvador’s Grupo Cuscatlán for $1.5 billion shortly after. Banistmo gave it more than 200 branches spread over Costa Rica, Nicaragua, El Salvador, Honduras, Panama and Colombia. G&T would fill the Guatemala gap. Rumors regarding other big international banks eyeing Guatemalan financial institutions, some for multiples as high as 3x book value, have been making the rounds for weeks.

Moody’s has upgraded Axtel to Ba2 (stable) from Ba3 based on a rapid improvement in the credit metrics to levels prior to the acquisition of Avantel, as well as expected improvements in free cash flow generation. This impacts Axtel’s $162.5m 11% of 2013 notes and $275m 7.625% of 2017. The adjusted debt to Ebitda ratio is 2.3x, versus 3.8x just after the acquisition, which was completed in December 2006, says Moody’s. Simultaneously, interest coverage as per funds from operations plus interest expenses to interest expenses improved to 4.3x in the last 12 months, from a low of 3.1x in Q1 2007. “Constraining Axtel’s ratings are escalating challenging operating environment consequence of strong competition from incumbent Telmex, increasing wireless substitution and the strengthening of new-comers to the telecom arena such as cable TV companies and IP telephony service providers” says Moody’s analyst Nymia Almeida Almeida. This operating risk is somewhat mitigated by the growth potential for Mexico, evidenced by a low fixed line penetration rate of approximately 19% as of September 2007, as well as by Axtel’s stronger customer base mix.

HSBC is understood to be working on an acquisition of Guatemala’s G&T Continental, according to Guatemala City-based sources. “They’re doing due diligence,” says a banker familiar with the process. He adds that international banks are looking to make further acquisitions and suggests a Scotia purchase of Banco Industrial may well be next. “We’re going the same way as El Salvador, where there’s no national bank,” says the source. The banker adds that the trend is in general good for Guatemala. “Nobody’s losing any sleep about it,” he quips.

Mexican retailer Milano has launched a $190m leveraged loan to refinance debt and pay for the acquisition of other retailers, including Melody, say bankers close to the process. The deal pushes the boundaries of the LatAm loans market in the current global volatility by being sponsor-backed, leveraged and denominated partly in local currency. The Advent-owned retailer is looking to raise as much of the transaction as it can in pesos. It will offer 275bp over TIIE or Libor out of the box for a $170m equivalent 7-year term loan. Pricing is on a leverage grid, which at 4x leverage pays 325bp over TIIE or Libor, and at below 2x, 100bp over. Out of the box, the leverage ratio is 3.0x-3.5x. Pricing on the $20m revolver is 150bp at the highest ratio and 75bp at the lowest. Citi is lead arranger and bookrunner. Late last week, ING signed on with a $35m ticket as a bookrunner, leaving room for one more bookrunner spot and three additional MLAs with $30m tickets each. Retail syndication will be launched this week at meetings in Mexico and New York.

Alfa, the Mexican conglomerate, plans to make capital expenditures of $570m in 2008. The investments will build on acquisitions and expansions carried out in 2007, which the company described as a “transition year.”

Banco Santander celebrates 150 years with pan-regional dominance enhanced by the acquisition of ABN’s Brazil unit. It also wins the coveted LatinFinance Bank of the Year award. Find out more in the November issue of LatinFinance, including our most comprehensive survey to date of retail and local investment banks, featuring 27 awards in 19 countries. (www.latinfinance.com)

Canada’s Barrick Gold is buying control Chile’s Cerro Casale mine through the acquisition of fellow miner Arizona Star. It is offering to buy all of the latter’s common shares for CAD18.00 per share, valuing Arizona Star at approximately CAD773m. Cerro Casale is a large undeveloped gold and copper deposit.