Category: Chile

Telefonica’s Chilean unit plans to sell up to $554m-equivalent in bonds denominated in the UF inflation-linked unit. Under a shelf it has filed, it can sell up to UF8m ($277m) each of 10- and 30-year bonds in the local market. It did not give an indication of when the first sale will take place.

Chile’s Falabella is planning to sell bonds through a local bond program denominated in the UF inflation-linked unit worth up to $550m equivalent. The first issue from the retailer’s program is capped at UF8m from a total UF16m on the shelf, which can consist of a maximum 50% in either 10 or 30-year notes. Falabella does not indicate when the first deal might be placed. Its last local issue was a 2006 placement of UF8m in 5 and 21-year notes through BBVA and IM Trust.

Chilean mining project Minera Esperanza, a joint venture of Antofagasta and Marubeni, is heard making steady strides to clinch around $1bn in debt financing to support the $2bn endeavor. The 12-year deal already counts on a $1bn equity contribution from the sponsors, resulting in a debt to equity ratio of around 50% depending on how the debt portion closes. Since late November, the two sponsors, which are being advised by Rothschild, have added two more commercial banks – ING and Calyon – which brings the number of private sector lenders to 5. Mizuho, SMBC and BTM singed on early to form a club supporting the venture. Germany’s KfW, Japan’s JBIC and Canada’s EDC are the three multilaterals participating, and they may end up financing up to $500m of the $1bn in debt that needs to be raised, according to a project banker with knowledge of the deal. The company is likely to seek to raise as much as it can with commercial lenders before deciding the final breakdown. Bankers on the transaction remain mum on price expectations for the loan, which will likely include tenors matching the duration of the project. Bankers away from it speculate pricing should start at no lower than 350bp over Libor and include step ups. They point to Milpo’s yet unfinished syndication as another reference point. At the end of last year, the Peruvian miner was seeking $130m in 3-year funds at Libor plus 425bp through Credit Suisse.

Chile’s Esval has sold $87m equivalent in local bonds denominated in the UF inflation-linked unit. The Valparaiso-based water utility supplying region V priced UF2m in 2030 bonds at 102.12 with a 4.90% coupon to yield 4.70% and UF500,000 in 2014 bonds at 100.68 with a 4.94% coupon to yield 4.79%. The 2030s have a 10-year grace period. Esval will refinance debt and make capital investments with proceeds from the sale, rated A+/AA minus on a national scale. Santander managed the transaction.

Chilean retailer Cencosud has sold $103.5m-equivalent in local bonds denominated in the UF inflation-linked unit. The UF3m in 2030 bonds with a 10-year grace period priced at 99.98 with a 5.70% coupon to yield 5.70%. Proceeds will be used to refinance existing debt. Celfin managed the sale, rated AA on a national scale. The sale comes after Cencosud postponed the placement of up to $210m-equivalent in local UF bonds in December.

Wal-Mart says it will seek to buy the remaining shares of Chilean retailer D&S that it did not acquire in its initial tender offer, where it purchased 58.3% of the company. Wal-Mart intends to make the purchase on February 24 under the same terms of the original tender offer of $0.408 per common share and $24.48 per ADS. The previous majority owners of D&S will retain a 40.1% stake. The D&S shares, Wal-Mart says, will be pulled from the NYSE. Common shares will only trade on Santiago’s stock exchange.

Chilean retailer Cencosud plans to sell $106m-equivalent in local bonds denominated in the UF inflation-linked unit on Tuesday. The 21-year notes will feature a 5.7% coupon and be priced through an auction process. Proceeds will be used to refinance existing debt. Celfin is managing the transaction, rated AA on a national scale.

Wal-Mart says it has finalized its purchase of a 58.2% stake in Chile’s D&S for about $2.8bn. The Ibanez Scott family will retain a 40.1% of the retailer and 1.7% will be owned by other investors. Although the entrance of the retail giant to the Chilean market poses a challenge to local retailers such as Falabella and Cencosud, analysts are optimistic. Celfin Capital has rated Cencosud and Falabella a buy even though it admits the retailer will face tougher competition from Wal-Mart. The entrance of the US retailer, says Celfin, “should raise competition levels in the domestic supermarket industry further. Although we do not expect Wal-Mart to fully replicate its “every day low prices” strategy in Chile (though from a marketing perspective, Wal-Mart is likely to use the slogan), we do anticipate lower prices on the back of improved efficiency levels and selective price reductions.” Patricio Hernandez, equity analyst at Banchile, says competition will start to heat up in the second half of 2010. He explains that for one year, Wal-Mart will not make any major changes to D&S stores or management teams. After that period, Hernandez expects Wal-Mart to start making changes to D&S’s business model – although both are very similar – and implement its lower prices strategy.

Chile’s Celfin Capital initiates coverage of Cencosud’s stock with a buy recommendation and a price target of CLP1,320, a 23% hike from the stock’s CLP1,075 price January 21. Cencosud, says Celfin, derives 70% of its revenue from food sales, which represent a resilient income base in a volatile economic environment. It also says that although margins could experience pressure as consumers trade down and buy cheaper products, overall sales and Ebitda levels are unlikely to take a hard hit. The major challenges Cencosud faces, says Celfin, are the entrance of Wal-Mart to the market and the risk of a worse-than-expected downturn. These are the same challenges faced by Falabella, which Celfin also rates a buy. The shop expects Falabella to use cash to expand in Peru and Colombia, where it has been operating for more than 13 years with local partners.