Category: Chile

A deal to sell a 34.5% stake in Ecuador Bottling Company (EBC) to Chile’s Polar, also a Coca-Cola bottler, has been roadblocked by EBC’s majority shareholders, the Correa Group. The seller, an Ecuadorean investor called the Novis group, agreed to vend its stake to Polar in March for $64m. But Correa Group, which has the right of first refusal, is now trying to block the sale after having declined to acquire the stake. Correa Group’s strategy appears to be to prevent a transaction that would introduce a much more active investor into EBC, says a person familiar with the negotiations. Correa Group appears to be seeking out legal justifications that might help it block the sale, says the executive, who speculates EBC and Novis are also considering resorting to legal action against Correa Group to get the deal done. Analytica is advising the seller.

Fitch has upgraded Chile’s Embotelladora Andina to A stable from A minus, including the Yankee bonds due 2027. The agency notes a “continued strong business position and financial profile.” Growth in cash flow was driven by a favorable economic climate in the region and strong execution by the company at the point-of-sale, the agency adds. “During 2007, Andina’s soft drink sales volumes grew by 5.4%, while its total beverage sales volumes grew by 6.3%,” Fitch says. The largest threat to the company’s cash flow is an economic crisis in Argentina, the agency says. Andina is one of the largest bottlers of Coca-Cola products in LatAm.

Chile’s Parque Arauco has secured a 7-year $110m-equivalant syndicated loan denominated in the UF inflation-linked unit. The UF2.5m facility features a 2.5-year grace period and pays interest at UF plus 2.81%. The developer and operator of shopping malls plans to use proceeds to help finance the 2008 portion of its $1bn 2007-2009 development plan. Banco de Chile, Banco BCI, BBVA and BancoEstado are providing the financing. Arauco sold $160m in local UF-denominated bonds backed by a mortgage on its flagship property last month, also to finance its investment plan.

Chilean grocer Distribucion y Servicio has priced $263m in 2013 bonds denominated in the UF inflation-linked rate, at 96.94 with a 2.60% coupon to yield 3.30%. D&S plans to prepay short-term debt with proceeds. Larrain Vial managed the sale. Separately, water utility Aguas Andinas priced $109m in UF-denominated 2014 bonds at 98.940 with a 3.000% coupon to yield 3.223%. Larrain Vial and BBVA led the transaction for Aguas, a unit of Barcelona’s Sociedad General de Aguas. The company recently agreed to pay an estimated EUR105m for 51% of Empresa de Servicios Sanitarios de los Lagos.

Japanese conglomerate Marubeni has agreed to buy two 30% stakes in Chilean mine units from Antofagasta for $1.31bn. The Minera Esperanza unit holds the Esperanza and Telegrafo deposits and the Minera El Tesoro holds the El Tesoro mine and Tesoro Northeast deposits. Marubeni will also provide its share of the $1.9bn expected investment to develop the Esperanza project. Both units are located in the Sierra Gorda district of northern Chile. In a separate transaction contingent on the Marubeni deal, Antofagasta will buy out for $240m partner Mineralinvest Establishment in neighboring properties necessary for the development of Esperanza. Rothschild and Sullivan & Cromwell are advising Antofagasta on the Marubeni transaction.

After months of being away from the international loan market, Chilean credits, which command some of the tightest margins in the region, are returning to a vastly changed landscape. Endesa Chile and CMPC are heard to have sent out RFPs for new facilities which combined could total up to $850m. Despite an investment grade zip code, the two companies may experience significant upwards adjustment in margins. Endesa, is heard to be seeking a bullet loan of between $400m-$600m with a tenor of up to six years. One banker who was not invited to pitch guesses the credit could raise funds at Libor plus 60bp-75bp in today’s market. In February 2007, Endesa raised a $200m standby revolver at Libor plus 25bp. CMPC, a paper and pulp conglomerate, is also heard out with request for pitches on a $150m facility.

Moody’s has lowered its outlook for Chile’s electrical generator AES Gener to negative from stable. An increase in natural gas curtailments and, to a lesser extent, weak hydrology conditions negatively impacted Gener’s consolidated operating margins and cash flow during 2007, according to the agency. “Gener’s near-term financial profile is expected to remain weak as the company manages through expected further gas curtailments and a significant construction program,” says Moody’s. Headquartered in Santiago de Chile, AES Gener is Chile’s second-largest electricity generation company. It is 80% owned by AES Corporation with 20% listed on Chile’s exchange.

Distribucion y Servicio (D&S) plans to sell Friday about $262m in 2013 bonds, it said. The bullet maturity issue will be denominated in the UF inflation-indexed unit and is expected to have a 2.60% coupon. The proceeds will be used to repay D&S’ short-term debt. Larrain Vial is placing the notes.

Chile has kept its benchmark interest rate unchanged at 6.5%, the country’s central bank announced Thursday, citing the US crisis and pressures in the global credit market, as well as reduced dynamism in Q1 economic activity. “The central bank seems, admittedly, more concerned with the appreciation of the CLP than with non-tradable inflation, flirting with 10% yoy when the target is 3.00%, while the policy rate is still a neutral 6.25%” Goldman Sachs says. “We believe this is not prudent and we remain of the view that the central bank should not subordinate the still very challenging inflation objective to a growth or exchange rate objective,” the shop says.