Category: Chile

Gilding Chile’s first World Cup soccer match win in 48 years (1-0 versus Honduras), Moody’s upgraded the sovereign to Aa3 from A1. The agency cites the country’s economic resilience after February’s earthquake, as well as the government’s strong fiscal position and favorable debt profile. International reserves and fiscal savings are almost $40bn, compared with about $12bn total government debt, Moody’s says, adding that the average debt-to-GDP ratio for Aa rated sovereigns was 36% last year, but only 6% for Chile. Similarly, Chile’s debt-to-revenue ratio of 25% compares favorably with the Aa median of 88%. Moody’s also upgraded to Aa3 from A1 the ratings of Banco Santander Chile, Banco de Chile, Banco Estado and Banco Estado’s New York branch.

Chile’s central bank tightened the monetary policy rate by 50bp to 1.00%, saying that the immediate effects of the earthquake dissipated quickly and the economy continued to recuperate. Given the strong economic activity figure combined with the increase in inflation after months of deflationary readings, Bulltick had moved its expectations for the start of the tightening process with a rate hike of 25bp in June rather than holding until July. Morgan Stanley also believed Chile’s central bank was likely to start its policy normalization process this month with a 25bp hike after keeping its target rate at a record-low level of 0.50% since July of last year as growth quickly rebounded after March’s brief earthquake-linked dip.

Chile’s Corpbanca is understood to be in New York today holding bank meetings on a $150m 2-year, 2-tranche loan, say bankers. With BNP, Citi, Commerzbank, Standard Chartered and Wachovia already apparently on board, the deal is understood to be seeking only minor retail participation.

S&P has upgraded the ratings of Chilean sugar producer Iansa to B minus from CCC+. The outlook is positive. S&P cites the company’s improved financial flexibility and operating performance during the past 2 years and its successful $51m equity increase. “The positive outlook reflects our expectation that we could raise Iansa’s ratings if the company further strengthens its financial flexibility in 2010 and 2011. A reduction in debt position to near $100m by year-end 2010 coupled with a sound cash position would be consistent with the expected credit strengthening,” S&P says. Meanwhile, S&P has changed the outlook on the BBB minus ratings of Mexican household appliance company Controladora Mabe to stable from negative to reflect its improved financial performance and debt reduction and the agency’s expectation that this trend will continue. “In 1Q10, Mabe showed improvement in its sales volumes, trend that we expect to continue throughout the rest of the year, supported by positive growth prospects in Mexico and other key countries within the region, and consolidation of its Brazilian operations,” S&P says.

Chile’s Telefonica del Sur, also known as Telsur, issued UF1.5m ($60m) in 21-year local bonds in a single tranche. The A+ rated notes have a 73bp spread over local central bank notes, a coupon of 4.20% yielding 4.08% and are priced at 101.3. Total demand for the notes was UF3.5m, says a banker on the deal. Proceeds will be used to refinance debt. IM Trust handled the sale.

Chile’s Bancoestado says it plans to issue UF3m ($117m) in 28-year bonds at 4.50%. The notes, to be issued on June 23, are rated AA by Fitch and AA+ by Feller. Proceeds will be used to finance long-term assets. The bank will handle the sale itself.

S&P has upgraded to BBB minus from BB minus the ratings of Chile power company E-CL. The outlook is stable. The ratings agency says the company’s business risk profile has improved significantly following a merger with several power generation, transmission, and natural gas distribution assets that belonged to its main shareholder, Suez Energy Andino and its minority shareholder Chilean copper producer Corporacion Nacional del Cobre. E-CL is the market leader in terms of installed capacity in the Chilean northern electric system with about 50% share, says S&P. The firm was removed from CreditWatch with developing implications, where it was placed November 13.

Chile’s Banco Falabella has issued UF3m ($119m) in local bonds in 2 tranches. A 25-year UF2m piece priced at 96.83 with a 3.30% coupon to yield 3.69%. A 10-year UF1m piece priced at 97.21 with a 3.80% coupon to yield 4.02%. Proceeds will be used to fund operations. Celfin managed the sale.

BHP Billiton has appointed Peter Beaven as Chile-based president for base metals, effective November 1. He has been president of BHP’s Manganese CSG since October 2005, and prior to that was VP for carbon steel materials. Until he relocates from Johannesburg to Santiago, Ivan Arriagada will continue as acting president. Beaven replaces Diego Hernandez, who joined Codelco last month as its new CEO.

S&P has assigned an initial BBB+ (stable) counterparty credit rating to Chilean brokerage LarrainVial. The agency notes LarrainVial’s sound financial profile, good profitability and capitalization, and strong presence in the relatively low-risk Chilean financial system. However, it also notes the broker’s high revenue reliance on Chilean security market transaction volumes, high competitive pressures, and the challenge to strengthen management of market and operational risk. “The stable outlook reflects our expectation that the firm will keep expanding its domestic and international franchise without materially increasing its business risk profile,” says S&P.