Banco de Chile is set to close an equity follow-on expected to raise $187m equivalent today. Pricing and final terms should be announced tomorrow. The 1.4bn share follow-on would raise CLP90.3bn ($187m) based on Tuesday’s CLP64.50 close. In a research report, IMTrust says a fair price for the deal would be COP64.20, and the shop maintains a COP74.40 12-month target. The transaction comes as part of a 3.4bn share shelf approved at the beginning of the year, and follows two weeks of investor meetings. Proceeds are marked for general corporate purposes, mainly growing lending operations. BanChile and LarrainVial are managing the sale. Elsewhere in LatAm equity, Brazil’s Cimentos Liz is scheduled to follow Thursday with a BRL550m IPO, and entertainment promoter T4F is set for a BRL500m debut next week. These smaller equity raises set the stage for Arcos Dorados’ $1bn New York IPO and Gerdau’s BRL5bn follow-on due in the week of April 11.
Category: Chile
Luksic Pursues 20% of Nexans
Chile’s Grupo Luksic plans to take a 20% stake in France-based cabling network system maker Nexans over 3 years, on which it intends to invest $290m. Luksic has a 9% stake in Nexans and expects to increase it to 15% in 18 months. The group will buy the stake via its subsidiary Madeco, but according to Celfin, cash for the deal will come from its other subsidiary, Quinenco. “This will allow Grupo Luksic to add an additional board member and to make [Madeco] Nexan’s largest shareholder,” says BCI Estudios. In 2008, Madeco sold its cable unit to Nexans for $448m, the firm notes.
Chile Seeks Return to Market This Year
Chile is hoping to return to the international markets this year, Ignacio Briones, coordinator of international finance, tells LatinFinance, though the sovereign has no definite plans to do so. “This year or next,” Briones says on the sidelines of the IDB conference in Calgary, Canada, “Ideally, we would like to go this year.” Briones says Chile would be looking for a benchmark transaction, most likely a 10-year tenor, but could also look to do either a 5-year or 30-year tenor. The sovereign currently has no issuance in those parts of the curve, and one of its goals for an issuance would be to establish the yield curve for local corporate issuers. Finance minister Felipe Larrain tells LatinFinance that the sovereign has sufficient financing for its spending needs between revenues from taxes, sovereign funds and the $6bn it is authorized to raise in the local market. Briones says the sovereign would look for a “typical” size issuance, which would mean a minimum of $500m, he says. It could also look to retap last year’s CLP bond, he says. Chile returned to the markets last year after a six-year hiatus, raising $1.5bn in a USD and global CLP denominated transaction. Briones says the sovereign’s concern is less with the level of interest rates, but in achieving a tighter spread to US Treasuries than it had with its last issuance. Chile received a spread of UST +90bp on its 10-year bond, and Briones says the sovereign is seeing pricing in-line with what the issuer would need to see in order to come back to market. “Spreads should be the same or slightly below last time,” Briones says. “We are very confident that if not this year, the situation next year would be even better,” in terms of the spread to treasuries. Briones says the effects of last year’s 8.8 magnitude earthquake have been absorbed by the national economy, while Chile’s attractiveness as a credit has actually improved relative to the sovereign risk demonstrated by eurozone issuers. Meanwhile, the issuer may
Luksic Takes 10% of Vapores
Chile’s Luksic family acquired a 10% stake in local container shipping company Compania Sud Americana de Vapores (CSAV) for about $120m equivalent on Tuesday. The Luksic holding company Quinenco acquired 202m shares for CLP285.0 per share. Maritima de Inversiones, CSAV’s parent company, says it is the seller. “The deal brings a deep-pocket partner to the board,” says Celfin, which managed the sale. BCI Estudios, meanwhile, says the capital injection will improve CSAV’s stock performance, which had underperformed lately, with its share price dropping to a one-year low of CLP235 from a high of CLP590. CSAV’s shares closed up 30.5% at CLP352.9.
Chile Surprises with 50bp Rate Hike
Chile’s central bank tightened its policy rate by 50bp to 4.00%, 25bp more than expected by the market. The bank cites uncertainty and market volatility caused by the natural disasters in Japan and the political turmoil in Arab countries. However, it points out that on the domestic front, demand and employment figures continue to evolve positively. “Clearly they are trying to pull down inflation expectations,” says Nomura. Goldman Sachs had warned of a possible 50bp hike, although it predicted a 25bp hike, as did most market participants. “At this stage we assess a 20% probability of a 50bp rate hike (down from a probability of 35% due to the high uncertainty around the outlook for the global and Japanese economy following the recent devastating developments),” Goldman had said.
Hike Expected for Chile Rate
Market consensus points to Chile’s central bank tightening its rate by 25bp, bringing it to 3.75% today. “Though the minutes from the February meeting – in addition to recent comments by central bank officials – suggest rising concerns about the inflation outlook, the central bank seems committed to continuing its tightening cycle at a gradual pace, most likely in 25bp increments,” says Morgan Stanley. “At this stage we assess a 20% probability of a 50bp rate hike (down from a probability of 35% due to the high uncertainty around the outlook for the global and Japanese economy following the recent devastating developments),” according to Goldman Sachs.
Peru Approves Cencosud Bank
Peru’s banking regulator has allowed Chilean retailer Cencosud to expand its banking operations into that country. “We find this as positive as the company will be able to reduce the cost of funding,” says Celfin. BCI Estudios meanwhile, says that with this authorization, Cencosud has introduced all of its financial operations into Peru, where it had already introduced the Metro card, similar to the Jumbo card it has in Chile. These are credit cards that allow shopper to make purchases in all of the Cencosud’s stores.
Retail Sector Slows in Chile
Chile’s red-hot retail sector is beginning to slowdown from breakneck growth last year. “This year we should see same-store sales increase about 10% for the majority of Chilean retailers that operate department stores,” says Felix Lorenzo, portfolio manager and Chile country head at LarrainVial’s asset management unit. “This is a good rate of growth, but it is below that seen in 2010, when growth was around 15%-20%,” he adds. While stocks are also seen to be rising, the sequel to last year’s surge is not predicted to be a blockbuster. “In 2011, we should see sector stocks appreciate about 15% overall, in line with historical trends, but much mower than the 83% increase [seen in 2010],” Lorenzo explains. “These are actually decent investments over the long term, but they have had quite a run up in the past couple of years and are not cheap anymore,” says Nick Robinson, a Sao Paulo-based director with Aberdeen Asset Management’s EM team. The frothiness in the valuations of large cap retailers last year drew investor scrutiny of multiples. “Some retailers in Chile [are trading at] multiples of about 30 times earnings. Concosud is in that region and Falabella is not far behind that,” Robinson explains. “Normally, you don’t want to be paying more than 20-25 times earnings. That is the most we would pay for a retailer.”
Sudamericana de Vapores Plans Equity Raise
Compania Sudamericana de Vapores plans to increase its equity capital by up to $500m equivalent, it says, through the issue of new shares. The Chilean shipping company is scheduled to put the matter to a shareholder vote at a meeting April 8. The details and timing of the raise would then be determined by the company, it says.
Forum Issues CLP Bonds
Chilean car loan company Forum issued CLP20bn ($41m) in local bonds. The AA minus/AA+ notes were issued in a single tranche due in 2013. The first CLP issue of the year priced a 6.75% coupon at 99.01 to yield 7.19%, or 115bp over the BCP-13 benchmark. Demand was about the same as the amount offered, says a banker off the deal. Another banker off the deal believes Forum got a good price for the notes. “In normal conditions I would say a 100bp spread would have been fair, but what they got is still good considering inflationary pressures,” he says. Proceeds will go to working capital. Banchile lead the sale.