Category: Chile

Chile’s state-owned BancoEstado has placed $316m in inflation-linked bonds on the local market. A $157.8m five-year tranche priced at par to yield 3.40% and a $157.8m 10-year tranche at 101.52 to yield 3.48%, says the issuer. The notes have a AAA local rating from Fitch and proceeds will go towards the expansion of its businesses lines.

Parque Arauco, the Chilean shopping mall developer and operator, has bought 83% of the shares of Inmobiliaria Paseo de la Estacion, owner and operator of the Paseo de la Estacion Mall (MPE) for $61m. MPE’s total asset value is approximately $97m with debt of $24m, says Parque Arauco. MPE expects to generate Ebitda in 2008 of $12m, approximately 23% of Parque Arauco, consolidated 2007 Ebitda. “This purchase, and the recently announced acquisition of the Plaza El Roble Mall in Chillan, Chile, would increase Parque Arauco S.A.’s consolidated 2007 Ebitda by over 35%,” says Parque Arauco. The selling shareholders are made up of three principal families: Mujica, Santa Cruz and Yaconi, amongst others. The Chilean State Rail Company (EFE) will remain a 17% shareholder in MPE.

Chilean power generator AES Gener has postponed its sale of 540m additional shares due to market volatility. Its board will set a new date for the sale, which was to take place yesterday. Gener plans to use proceeds to help finance a $2.4bn 5-year generation buildout plan and refinance debt.

Banco Santander Chile has issued subordinated UF-indexed bonds worth around $78.3m. The 2032 bullet-maturity bonds priced at a spread of 80bp over the 10-year Chilean BCU bond. Fitch rates the transaction AA+. Santander says it has issued about $1.4bn in bonds this year.

Public Service Enterprise Group (PSEG) plans to sell its stake in Chile’s SAESA electricity distribution group. The New Jersey-based energy holding company has hired Credit Suisse as an advisor. It plans to use proceeds for the repurchase of $200m in 10% of 2009 notes. SAESA includes the Frontel, Edelaysen, STS, Luz Osorno and PSEG Generacion companies and reaches 26% percent of the country’s population. “The SAESA group of companies has grown rapidly and we are pleased with the dramatic improvement in operations over the last two years in particular,” says Matthew McGrath, president of PSEG Global. “These are very good companies in high growth areas. The market today is providing attractive valuations for quality Latin American electric distribution companies,” he adds. PSEG also has small investments in electric generation plants in Venezuela. PSEG is a diversified energy company based in New Jersey.

S&P has raised Chile’s debt ratings to A+ (stable) from A. “The upgrade primarily reflects Chile’s economy’s increasing resilience to potential adverse shocks,” says S&P analyst Sebastian Briozzo. “This characteristic is particularly important for an economic structure that still depends highly on commodities.” Chile has been able to manage the upward part of the current commodity price cycle by strengthening its credit profile, creating the conditions to better endure instability than it had in the past, says the agency. It predicts that Chile’s 2007 fiscal performance could result in a surplus as high as 9% of GDP, pushing the debt level into a net asset position, even after adding the pension recognition bonds to the debt stock for about 9% of GDP. “Chile’s fiscal surpluses will likely remain more than 4.5% over the next three years, continuing to consolidate Chile’s fiscal strengths,” says S&P. However, it notes that GDP per capita, despite doubling over the last four years to $9,800, is still significantly below the $16,000 of the A median. And there is significant exposure to a downturn in commodities. The upgrade also lifted Banco del Estado de Chile and Banco Santander Chile to A+ from A.

Chile’s Cencosud is acquiring leading Peruvian retailer Grupo Wong in a transaction worth $500m equity value. The Wong family, which owns 96.83% of Grupo Wong, will get 49.75m shares of the Chilean retailer under the deal, which is valued at 2,000 pesos a share. Credit Suisse was the sole bank involved as Cencosud apparently did not use an advisor. Wong controls 62% of Lima’s retail market. Cencosud is also in the market with a $490m 5-year amortizing loan to pay for the acquisition of Brazilian grocery chain G. Barbosa. That deal is scheduled to close in January and steps up from Libor plus 35bp in year one to 40bp in year two, 45bp in year three and 60bp in years four and five. It amortizes by 25% in years three and four and the remaining 50% in year five. Santander is leading, with BBVA and BNP as bookrunners.

Chilean retailer Ripley has sold 98m new shares, raising about $109m, it said. The shares, representing about 5% of the company’s total, sold for CLP555 each, below the $610 minimum set in the offering’s initial filings. The company is also set to offer another 24m shares to current shareholders in an offer expiring January 15, to raise about $30m. The proceeds from yesterday’s sale and offer to existing holders will be used to finance a $588m investment plan in Chile and Peru.

Chile’s central bank raised the benchmark interest rate by 25bp to 6% Thursday, surprising most analysts who thought the rate would be kept on hold. Credit Suisse was among the few shops predicting a hike. “By tightening today, against market expectations, the bank would send a strong signal of discomfort about current inflation levels (headline and core) and would contribute to the reduction of second-round effects. In our opinion, inflation risks in Chile have been underestimated, while risks to the growth outlook have been exaggerated,” according to a Thursday report. Separately, Moody’s’ Mauro Leos told Bloomberg Thursday the agency considering raising Chile’s outlook to positive from stable next year because of rising copper exports.

Chile’s Banco Estado, which several weeks ago put out an RFP for a 5-year loan of up to $350m, has postponed launch until early next year due to turbulent market conditions, according to a banker close to the process. The state-owned bank, which is understood to have already tapped an institution to lead the syndication, was apparently greeted with some resistance from prospective lenders who found Estado’s desired pricing of Libor plus 20bp-25bp somewhat tight given current market conditions. Short term borrowing costs for European banks especially have risen significantly in the past weeks, making lending at razor thin margins a tough proposition. Chilean loans are of particular interest at the moment since the country has for years commanded the narrowest margins in the region. In September, Codelco, another state-owned Chilean entity, took out a $400m 7-year step up loan that pays 12.5bp over Libor in year one and 15bp over Libor in the ensuing three years.