Category: Caribbean

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.

The banks that have provided Marubeni Caribbean Power Holdings (MCPH) with a $310m bridge loan hope to take out the 1-year financing as early as the end of this year, according to bankers on the deal. MCPH, which belongs to Marubeni Corp, acquired all the shares of Mirant Caribbean Holdings, an independent power producer. Mizuho is leading with ING, Calyon and ABN AMRO as MLAs.

High yield bond issuance out of LatAm and the Caribbean increased by 47% in the first seven months of 2007 to $24.2bn, compared to $16.5bn for the first seven months of 2006, according to Dealogic. By contrast, investment grade issuance fell by 16% to $10.2bn from $12.1bn for the same period last year. Corporate bond issuance jumped 20% in that period and accounts for two thirds of the overall volume, which posted a 14% year on year increase to $51.1bn raised through 311 deals compared to $44.7bn and 324 deals in the first seven months of 2006. The fastest growing sector in the region is oil and gas, Dealogic finds. The sector is the second most active, with an 11% increase in issuance this year compared to 2007, accounting for 19% of all bonds issued.

Central American and Caribbean sovereign debt lost 1.15% in July, taking them to a year-to-date return of 1.56%, according to Bear Stearns. This was less the 2.83% July loss in the LatAm component of the EMBI+, which tracks the bigger sovereigns, and proves that this region is still a relatively safe haven. However, the problem for investors trying to get out during the global storm is a lack of flow. “Liquidity in this sector has declined to very low levels, according to our trading desk,” says Bear, which is one of the few shops that makes markets in the region. “Investors, generally speaking, are not selling the smaller credits at times like these, but buying is also very muted. Indeed, CDS contracts may be more liquid than cash bonds, which is not common in the Central American and Caribbean credits,” adds Bear. The shop maintains that economic fundamentals are still solid, and blames the rout on hedge fund deleveraging and fear of redemptions among other things. “Credit trends in the emerging markets, including the Central American and Caribbean region are, in our view, unambiguously improving,” says the shop.

National Gas Company (NGC) had been planning a return to the international capital markets in the third quarter. But Daniel Sankar, the Trinidad and Tobago gas merchant’s vice president of finance and information management says this has been put on hold because of revised project needs. “We are not planning any new debt for 2007,” Sankar tells LatinFinance. “The big spending will not be done until next year.” NGC typically funds projects 20% with internal resources, and Sankar says there is cash on hand for current projects. A $200m-$300m issue with a 15-year average life had been expected to hit the market. “We are still looking at it,” adds Sankar. A reopening of a $400m 2036 bond issued in early 2006 through Citi and Lehman was being considered. The decision to hold was made before the current volatility.

S&P has revised its outlook on The Commonwealth of The Bahamas’ single A rating to positive from stable. According to S&P credit analyst Olga Kalinina, the ratings reflect the Bahamas’ macroeconomic stability, prudent fiscal policies, and steady monetary stance. “The Bahamas’ political environment is stable, and its standard of living is high. Public sector external debt is low and declining, with net external assets at 8% of current account receipts in 2007,” she adds. Economic growth, is expected to pick up and stabilize at about 4% in the next three to five years, reflecting investment projects in the tourism industry. Estimated at over $10bn, committed and already-started projects should provide positive externalities to a wider economy, supporting S&P’s expectation of improving sovereign creditworthiness.

Visa card issuance in Latin America jumped 37% year-on-year in the 12 months to March 31, the firm said Tuesday. International Latin American and Caribbean region point-of-sale volume meanwhile increased 26% to $116.3bn in the same period. Visa claims 91.3m issued in the region. Purchases made with Visa credit cards grew 26% to $77.8bn, while volume with debit and prepaid products registered a year-on-year increase of 25% to $38.5bn. “We have seen more than 80% growth in the issuance of Visa credit cards since 2005, particularly in entry level segments, as a result of greater credit access and specialized products extended by issuers,” says Eduardo Eraña, president and CEO of Visa International for LatAm and Caribbean. Growth has been focused on entry-level customers, with monthly income of $100-$500.

GraceKennedy, the Jamaica-based group, through its subsidiary, First Global Holdings, has acquired a 90% holding in ONE1 Financial, based in Trinidad & Tobago. The newly acquired company will become part of the First Global group, which currently includes First Global Bank and First Global Financial Services. ONE1 Financial specializes in structured finance, securities trading, capital raising and financial advisory services. In Jamaica, First Global Group provides a full range of banking and investment services including equity trading, pension fund management, asset and portfolio management, and corporate finance and advisory services. “Trinidad & Tobago is the fastest growing economy in the English speaking Caribbean therefore it is very important that GraceKennedy continues to participate in its future development,” says Don Wehby ceo of GraceKennedy Investments.

National Commercial Bank of Jamaica raised $50m in securities backed by diversified payments rights Friday by placing the lot into the hands of investors in a privately arranged transaction. The notes, part of a program started last year with a $100m issuance, is backed by electronic transactions ranging from FDI flows to remittances to export payments. Pricing information was not revealed. Credit Suisse led the BBB minus (Fitch) deal.

Caribbean mobile operator Digicel has announced three internal promotions to focus the company’s efforts on expanding in Central America and deepening market share in the Caribbean. Donal O’Shaughnessy, a former director in infrastructure, has been named COO for Central America and will lead Digicel’s push into the region and oversee the integration of new acquisitions. Digicel has an operation in El Salvador, a license in Guatemala and is actively pursuing new targets. Kevin White, formerly CEO for Digicel Eastern Caribbean and Trinidad & Tobago, is now chief operations officer for the all of the Caribbean. Niall Dorrian, formerly the COO of Digicel Jamaica, has been appointed CEO of the Trinidad & Tobago. In March, Digicel had 4.7 million customers across 22 markets in the Caribbean, Bermuda and Central America, with investments exceeding $1.5 billion.