Category: Chile

Fitch has upgraded Chile’s ratings to A+ from A. The outlook is stable. The upgrade reflects years of prudent macroeconomic management that incorporates healthy public finances, according to Fitch. It also highlights an effective and credible monetary regime, competitive markets and multiple free trade agreements.. Fitch estimates 2010 GDP expanded by 5.3%, a better-than expected result given the intensity of the February 2010 earthquake. It also expects growth to accelerate to around 6.0% in 2011 owing to Chile’s robust domestic fundamentals and institutional stability, before returning to a more trend-like 4.8% thereafter.

Chilean state-owned copper miner Codelco plans to invest around $3.2bn in 2011, up from $2.4bn in 2010 and $2.0bn in 2009. Jose Antonio Alvarez, Codelco’s executive vice president of finance explains that to finance the investment plan, the company will take several approaches. Among them, he tells LatinFinance that the company is negotiating with the government to retain 20%-30% of its annual earnings. Between 2006 and 2009, Codelco retained between 20%-30% of its annual earnings while the rest went to the state, says Alvarez. However, last year because of the earthquake, the government kept 100% of Codelco’s earnings. He adds that this, plus additional capital injections from the government, is equivalent to about $2.0bn per year. Codelco made $2bn net profit in H1 2010. Negotiations with the government on this subject should take place between March and July. Codelco recently sold its 40% stake in power generator and distributor E-CL on the local market and in the US for $1.05bn, a plan which had been among the options it had been considering for the asset since the middle of last year. Codelco hired LarrainVial and JPMorgan, which have been advising it on strategic alternatives, as coordinators. Santander is co-manager. France’s GDF Suez, which holds a 52.4% stake, in addition to a 7.6% free float. The company estimates that it will still need between $500m-$700m. To obtain these funds, Codelco could go to market seeking dollar bonds, but Alvarez says there are no concrete plans to do so at the moment. The company recently obtained a 5-year bullet $100m loan from the Bank of Tokyo-Mitsubishi UJF, says a source with knowledge of the deal without disclosing pricing. Alvarez declines to disclose terms.

EC-L shares sank 5.2% to CLP1,199.70 in the day following a CLP509bn ($1.05bn) follow-on offer that was more than 2x bid. Chilean miner Codelco sold 424.30m shares, or its entire 40% stake, in power company E-CL at CLP1,200.00 each, pricing Friday morning after closing books Thursday night. The price came at a 5.2% discount to Thursday’s CLP1,265.20 what closing price. Total demand hit CLP1.239trn ($668m), E-CL says. Pension funds accounted for 32.8% of the deal, other domestic institutions 18.0%, foreign institutions 26.6%, large non-institutions 8.8% and retail 12.9%. The sale of the asset raises funds for state-owned Codelco’s investment plan, including $1.5bn-$3.0bn this year, and is part of the government’s strategy to meet fundraising needs for earthquake-related reconstruction. France’s GDF Suez still holds a 52.4% stake in the power company, in addition to a 7.6% free float. LarrainVial and JPMorgan managed the sale.

Chilean airline LAN says it is selling courier subsidiary Blue Express to investment holding company Bethia for $54m. A banker off the deal expects Bethia to pay in cash. The target’s book value as of December 31 is $7m, LAN says, which values the deal at 7.7x book. The deal will go through due diligence and is expected to close in 45-75 days. LAN’s financial advisor was Santander, says a company spokesman.

Chile’s Codelco has closed books on the sale of its 40% stake in power company E-CL, with the pricing set to be fixed this morning. The shares closed down 1.2% at CLP1,265.20 Thursday, which would imply a valuation of CLP536.4bn ($1.1bn) for the 424m shares state-owned miner Codelco holds. Investors and analysts expect strong demand for the asset, part of a set of planned privatizations included in the government’s earthquake reconstruction funding efforts. “There should be strong demand from local private and institutional investors and international investors, and they shouldn’t have a problem raising $1.1bn,” Tomas Gonzalez, equity analyst at Celfin tells LatinFinance. With plans for $1.5bn-$3.0bn in capex this year, it does not make sense for Codelco to hold on to its E-CL stake, he says, especially now that it has locked up a long-term power supply contract. France’s GDF Suez still holds a 52.4% stake in the power company, in addition to a 7.6% free float. Proceeds of the sale are marked for Codelco’s investment plans. LarrainVial and JPMorgan are managing the sale, which follows a 3-week roadshow.

SalfaCorp has announced a CLP122.5bn ($249m) capital raise. The structure of the raise will be decided at the Chilean construction and engineering firm’s next shareholder meeting.