Category: Caribbean

Central American and Caribbean sovereign debt returned 0.51% in August, bouncing back from a July loss of 1.15%, according to Bear Stearns. The bank considers the performance “very respectable” given the volatility in the global credit markets. It sees the best potential in Panama, based on a strong credit and growth story, and in Guatemala, where says bonds are cheap on a relative value basis. Bear also favors the region’s prospects for weathering a slowdown in the US economy. “Our US economics team does not foresee a recession in the US, though a slowdown is certainly possible. If this plays out, we believe that the Central America and safe from a credit standpoint,” the bank says. Outperforers in August include higher-quality names like Bahamas, Panama, Barbados, and T&T. Jamaica also outperformed following a $225m bond maturity. Grenada and Belize underperformed, as did, to a lesser degree, Guatemala and El Salvador.

Palmary Enterprises, a Belize-based investment firm, has joined the bidding for Australia’s Consolidated Minerals (CSM). It is offering $3.95 cash per CSM share and the CSM board says it is considering the terms. The deal is better than the recently sweetened bid from Pallinghurst Resources Australia, of $3.60 cash per CSM share, which the board unanimously recommended in the absence of a superior offer. CSM has also in recent weeks received a takeover bid from Territory Resources of $2.00 cash and 1.5 Territory shares for each CSM share, subject to a 90% minimum acceptance condition. The Palmary offer values CSM at just over $900m, according to Australian press.

Hurricane Dean may dent growth in Jamaica after it hit the south coast of the country hard, but Bear Stearns for one, anticipates no payment disruptions on external debt, including a $225m bond coming due September 1. Bear notes Jamaica’s strong willingness to pay and ample foreign-exchange reserves, at over $2bn. On the bright side, the hurricane did not devastate tourist areas, and Bear predicts tourism will recover quickly. However, the city of Kingston and other areas on the south coast sustained heavy damage, including harm to the agricultural crop and port infrastructure for bauxite. “It seems likely that the storm will cost the government some money,” says Bear.

Marubeni Caribbean Power Holdings (MCPH) has launched a cash tender offer for any and all of the $100m aggregate principal amount outstanding of 7.017% notes due 2016 issued by Mirant Trinidad Investments (MTI). MCPH acquired MTI on August 8. Bondholders tendering and giving consent by September 5 get $1,012.50 per $1,000.00 principal, including a $1.25 consent payment. Those who commit by September 19 will receive $1,011.25 per $1,000 principal. Consent is to amendments to the indenture governing, which will eliminate certain restrictive covenants and events of default and modify the provisions of the indenture. MCPH is paying for the buyback with proceeds from a new $110m credit facility. In addition to the tender offer, MTI is making a separate change of control offer to purchase any and all outstanding notes at 101% of principal plus accrued and unpaid interest to, but not including, the purchase date. The change of control offer expires September 24. ABN AMRO, Calyon, ING and Mizuho are dealer managers.

Banks in Latin America and the Caribbean have minimal or nonexistent exposure to US subprime securities and as a result will likely weather this downturn with relative ease, according to Fitch. “Securities portfolios in the region continue to be concentrated in instruments issued by the holders’ local governments,” and any other holdings tend to be of higher quality instruments, says the report. As a result there should be no change in the credit ratings. However the mark to market of these holdings could depress earnings at insurance companies and banks. The reduced availability of cross border capital markets financing – a number of issues have been pulled or postponed – may also have an effect, says the report. Most of the funding for banks comes from local markets, notes Fitch, adding it is comfortable with the ability to refinance in the coming months.

Alcoa has halted production at its 1.4m ton Jamalco alumina refinery in Clarendon, Jamaica to assesses damage caused by Hurricane Dean. “In light of the temporary shutdown of the facility, damage to the port, and likely resulting delays in shipments, the company has declared force majeure to its customers,” says the firm. It adds that the port from which Jamalco ships alumina sustained substantial damage in the storm, while the bauxite mine and refinery lost power. Alcoa temporarily curtailed production at the refinery last Saturday as a safety measure in advance of the hurricane. Jamalco is 45% owned by the Government of Jamaica.