Category: Colombia

Colombia registered inflation of 0.3% in May, and took inflation for the 12 months through May to 6.23%. Consumer prices rose to 4.42% for the first five months of the year, compared with 2.71% for the same period in 2006. Price rises in May were driven by health (+0.49%), food (+0.47%) and housing (+0.36%) costs. The Central Bank has set a target range of 3.5-4.5% this year.

The IFC has signed agreements with Kappa Energy Colombia, a subsidiary of oil and gas group Kappa Energy Holdings for a debt facility of $20m and the option for an equity investment of up to $10m to support its continued growth. Kappa has been operating in Colombia since 1997 and holds exploration and production licenses. IFC’s total portfolio in Colombia as of December 2006 was over $500m.

Colombia’s Suramericana de Inversiones has flexed up the pricing on a $150m 3-year loan to 112.5bp from 75.0bp, according to bankers away from the transaction. The reason for the change, according to lead bank Citi, is that Colombian regulators imposed capital controls requiring banks to keep larger amounts of deployed funds within the country for four months. The borrowing entity was also changed from a Colombia-based firm to a British Virgin Islands-based vehicle. The loan was already struggling well ahead of the government’s announcement because of aggressive pricing. Market participants say the new pricing reflects a more appropriate level for the deal, and that it should go well from here.

Moody’s and Standard & Poor’s have both awarded AES Gener, the Chilean subsidiary of AES of the US, investment-grade status. Moody’s also upgraded the notes of its wholly-owned subsidiary, Colombian AES Chivor & CIA to Baa3 senior unsecured and Ba2 senior secured, respectively. Chivor’s corporate family rating was also upgraded to Ba2. The rating outlook for Gener and Chivor is stable. Moody’s raised its rating to Baa3 from Ba1, while S&P awarded it BBB minus. The upgrade will allow AES Gener to access more flexible financing and help with its expansion plans, said the company.

Colombia’s Central Bank raised its benchmark interest rate on Friday by a quarter of a percentage point to 8.75%, from 8.5%, in line with market expectations. Continuing inflationary pressures meant analysts had predicted further tightening after the Bank raised rates by the same amount last month. Annual inflation was 6.26% as at the end of April, well above the central bank’s target this year of between 3.5% and 4.5%.

Colombia’s industrial output rose 15.1% year-on year in March, according to data from national statistics agency DANE. Employment in the sector was up 3.84% and sales by 15.6%. Subsectors leading the growth comprise: iron and steel and metals smelting (+60.1%), cars and autoparts (+42.9%) and non-ferrous minerals (+28.2%). These three subsectors drove growth throughout the first quarter, taking it to 15.26%, compared with the same period last year.

Colombia’s government moved to stem inflation on Monday by raising commercial banks’ reserves on customers’ deposits, which in turn will curb retail lending. The banks will now have to send 27% of new checking account deposits, 12.5% of savings accounts and 5% on CDs with maturities less than 18 months, up from levels of 13%, 6% and 2.5% before. In another measure aimed at damping down the economy, the Bank is imposing a 40% deposit requirement on all corporate and government external borrowing to slow down the inflow of dollars.

In another sign that the bank market may be turning against borrowers – albeit only slightly – a deal for Suramericana de Inversiones is faltering. The Colombian investment company that owns shares in Bancolombia and Grupo Nacional de Chocolates is struggling to raise a $150m 3-year loan. The facility, described as a holding company deal backed by shares, launched at 75bp over Libor, a price many non-participants said was too tight. That figure could still be adjusted, say bankers. The deal went out to MLAs at the start of April and was expected to be completed by May. But as of Monday, lead arranger Citi still had the books open. Competing bids for the mandate are heard to have come in at between 5bp-30bp wide to the 75bp level.

Colombia has sold $1.12bn worth of new peso-denominated bonds to fund the buyback of existing debt. The new TES bonds, maturing in 2009 and 2023, will mostly pay fixed rates of between 9.80% and 10.35%.

Colombia’s government has pulled in $229m (473m pesos) from the first round of its privatization of power generator Isagen, which it put on the block for the country’s “social groups” at the end of February, in accordance with Colombia’s privatization laws. The government is hoping to capture around $262 million via the IPO of 20%, or 2.44 million shares, of Isagen, more than double its original estimate. It had set a minimum price per share of 1,130 pesos ($0.50). A second round of the share sale will open on June 2 and will be open to local and foreign investors alike.