Chile’s central bank raised its rate Tuesday by 25bp to 5.25%, in-line with market consensus. “Though momentum in the economy remains strong, inflation has remained well behaved and resolute central bank action has succeeded in bringing down inflation expectations; moreover, in its most recent minutes the central bank indicated some improvement in the inflation outlook,” Morgan Stanley says.
Category: Chile
Posted inDaily Brief
Chile Targets $1bn-Plus Aguas Block Sale
The government of Chile could raise more than $1bn today when it is scheduled to sell a 30% stake in water utility Aguas Andinas. The government’s Corporacion de Fomento de la Produccion (Corfo) is selling up to 2.14bn of shares to the public, meaning a CLP556.4bn ($1.19bn) deal at Tuesday’s CLP260 closing price. If all are sold, the government would be left with just a 5.0% piece, though this position includes class B shares that would allow it to retain certain veto powers in major decisions going forward. Books were due to close yesterday, with pricing to be announced this morning. “It’s a quasi-bond,” says an equities analyst, citing a dividend yield of more than 8% and a stable business model. Banchile, Bank of America Merrill Lynch and IM Trust are managing the sale. Andinas is 50.1% owned by the Inversiones Aguas Metropolitanas (IAM) vehicle, which is in turn 56.6% owned by Spanish water utility Agbar, which is controlled 75% by France’s GDF Suez. Suez had been heard looking to increase its stake in Andinas through the offer. Privatized in 1999, Andinas provides waste and water services in Chile through six subsidiaries. The government got approval late last year for the sale. This follows January’s $1bn sale of 40% of utility E.CL and is part the government’s plan to meet increased financing needs following last year’s earthquake.
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Enap Turns to Loan Market
Chilean state owned oil and gas company Enap has sent out RFPs as it seeks to raise $500m through loans with 3 and 5-year tenors, say market participants. Submission deadlines have passed, but banks expect a response as soon as next week. The company was considering the loan market as early as last year, but opted instead to issue a US$500m 10-year bond which was priced in August at 99.593 with a 5.250% coupon to yield 5.300%, or UST plus 240bp, inside of the 250bp (+/-5bp) guidance. Demand for the paper reached a healthy US$2.5bn despite a downgrade that year. BofA Merrill Lynch, BBVA, BNP and Scotia managed the bond sale.
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Santander Ends Show
Santander Chile ended its non-deal roadshow last week with a better indication of market sentiment for a potential bond issue, but pricing levels were thought to be unsatisfactory for the financial entity to take further steps, say rival bankers and investors. The wait-and-see approach may change if market conditions improve, but the bank is not thought to be in any rush to pull the trigger. “It does not surprise me that they are not coming to market,” says a DCM syndicate official. “They are a very price-sensitive issuer and the local market offers very competitive rates making it cheaper to issue locally.” LatAm corporate issuers in the dollar market remain on the sidelines in the face of headline risk despite favorable fundamentals. Volatility from the presidential elections in Peru, negative US economic data and re-emerging European debt woes have left many issuers waiting for better timing to issue. Santander Chile, rated A3/A+/AA, was last in the dollar market in January when it issued a $500m 2016 floater via JP Morgan and Santander, pricing it at Libor plus 160bp.
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Vapores Starts Equity Road Show
Chile’s Compania Sudamericana de Vapores (CSAV) has started investor meetings for a $500m share subscription open to existing holders. It plans to sell up to 834.7m shares at CLP285 each. If all shares are sold, this would raise a total of CLP237.89bn ($508m). The shipping company is offering holders 0.411325 shares for each existing share during a period expiring June 30. Chile’s Grupo Luksic, which brought its stake in CSAV to 20% in April, plans to subscribe all of its rights and will pick up any rights not subscribed by current holders, according to a report by bookrunner Celfin. Proceeds will be used to help Vapores to acquire cargo ships and for working capital. Shares closed at CLP291Monday, implying a 2.1% discount for the rights offering price.
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Chile Expected to Raise Rate
Chile’s central bank is expected to raise its rate by 25bp to 5.25% today, according to market consensus. “Following three consecutive monthly 50bp rate hikes and a policy rate level that is now at 5.0%…we expect the central bank to slow the pace of rate normalization” Goldman Sachs says in a report. Morgan Stanley also predicts a 25bp hike. “Though momentum in the economy remains strong, inflation has remained well behaved and resolute central bank action has succeeded in bringing down inflation expectations; moreover, in its most recent minutes the central bank indicated some improvement in the inflation outlook,” the shop says.
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Security Prices $200m Equity Raise
Chile’s Grupo Security has priced a CLP36.22bn ($77.5m) public follow-on, part of a CLP90.00bn ($192m) capital increase through the issuance of new shares. The financial group priced the 181.1m public shares at CLP200 each, representing a 4.3% discount to Thursday’s CLP209 close. Including the participation of existing holders, the company will issue 450m shares total. Security is raising funds for growth at its various units. The group’s main operation is Banco Security, though it also has operations in insurance, investments and asset management. IMTrust and Security’s brokerage unit managed the sale. Shares closed at CLP WHAT Friday. Chile’s equity market has been active this year, with fishery Australis Seafoods raising $71m equivalent last week, and Aguas Andinas set for a follow-on Wednesday and Cruz Blanca to IPO the following week.
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Australis IPO Tops $70m, Trades Up
Chilean fishing company Australis Seafoods priced a CLP33.3bn ($71m) IPO near the middle of the market’s expectations, and rose 1.3% in its first day of trading. The salmon and trout exporter sold 180m shares at CLP185 each, with analyst expectations having centered around CLP175-CLP190. The company also made 7m shares available to employees. Demand topped CLP353bn from 711 accounts, Australis says. Local institutions and pension funds made up 46.9%, local retail investors 20.6%, local non-institutions 14.6%, and foreign accounts 3.3%. The sale represents a 13% float, and raises funds to improve production, with the company planning to spend $274m through 2015. The company was generally seen as inexpensive compared to listed peers, with analysts seeing less than 10x EV/Ebitda versus 10x-15x for competitors. The company, established in 2007 to consolidate the various fish businesses of Chilean businessman Isodoro Quiroga, consists of three branches: Australis Mar, which raises and harvests salmon and trout, Landcatch, which produces salmon eggs and smolts, and 50% of True Nature Holdings, a US salmon products distributor acquired this year. LarrainVial managed the sale. Shares closed Thursday at CLP187.43. As Chile’s fisheries make a comeback from a 2008-2009 fish disease that decimated the industry, several are choosing the bolsa to raise funds to increase production. AquaChile raised $374m equivalent in its IPO last month, following Camanchaca’s $225m equivalent in November, and Cultivos Marinos Chiloe expected this year. On the whole, the Chilean new issuance market is becoming one of the region’s more active, with a follow-on from Security today and Aguas Andinas next week, as well as the IPO of Cruz Blanca the following week.
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Chile’s Security Set for Follow-On
Grupo Security is scheduled to announce the price of an equity follow-on this morning that could raise $200m equivalent. The financial company was to close books yesterday in the sale of 450m primary shares, which would raise CLP94.05bn ($202m) at Thursday’s CLP209 closing price. Security is raising funds for growth at its various units. Security’s main operation is Banco Security, and it also has operations in insurance, investments and asset management. IMTrust and Security’s brokerage unit are managing the sale.
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Chilean Builder Readies IPO
Ingevec has made its initial registration for an IPO, according to a banker managing the process, adding to the growing list of issuers from Chile this year. The construction company’s roadshow should start within the next month, the banker says, though other details about the exact size and timing of the transaction are yet to be determined. The float would be up to 30%. LarrainVial is managing. The construction, engineering and real estate company is raising funds for its expansion plan over the next few years, according to remarks from company officials in the Chilean press. Ingevec has a project portfolio of more than $300m, according to local press reports, and has diversified in recent years into areas including properties and producing modular bathrooms and kitchens.