Category: Colombia

Credit Suisse is recommending investors switch out of Colombian FRN 2015s into the more liquid 2017s to take advantage of current levels. Recent allegations of paramilitary links to allies of president Alvaro Uribe have caused Colombian spreads to widen and the 2015s to outperform. However, Credit Suisse analysts believe that if “allegations regarding Uribe quiet down and Colombia spreads tighten back to previous levels, the ’15s are likely to underperform”.

Colombia is planning to issue $1.25 billion worth of global, local-currency bonds next year, according to Dow Jones. On Tuesday, Congress approved government plans to issue peso-denominated global bonds, which may replace peso bond issuances planned in the local markets. Congress also approved an issuance of Samurai bonds worth up to $500 million. Colombia has already sold $2 billion of international bonds to satisfy next year’s financing plans.

Following the signing of its free trade pact with the US last week, Colombia sealed a comprehensive treaty with Chile, Monday, covering investment, government procurement and services between the two countries. Colombia and Chile had already liberalized much of their bilateral trade through an existing free trade framework. Colombia finally signed its free trade agreement with the US in Washington last week after two years of negotiations. The trade pact must still be approved by Congress in the US as well as in Colombia.

Colombia is to swap up to 22 billion pesos ($9.7 billion) of local currency-denominated debt maturing 2007 to 2012 with longer-dated bonds. The swap, due to take place on Wednesday, continues a strategy by the government to replace more expensive short-term debt and extend out the yield curve for its local-currency paper. The government will exchange up to 8.3 trillion pesos in inflation-linked bonds, maturing 2007 to 2010, and up to 14 trillion pesos of fixed-rate bonds maturing 2007.

Titularizadora Colombiana – Colombia’s answer to Fannie Mae – is to offer $54 million-worth of its residential mortgage-backed securities or TIPs (títulos hipotecarias) next month, for the first time backed by fixed-rate mortgage loans in pesos. (The loans are originated by local banks Colpatria and Davivienda.) So far, Titularizadora has issued TIPs denominated in UVRs – an inflation-indexed currency unit.

The shareholders of Colombia’s largest energy provider, state-controlled Interconexión Eléctrica SA (ISA), have approved a new share offering by the company. ISA hopes to raise around $218 million from the sale of 88.34 million new shares. The share sale will help fund expansion plans that include the acquisition of the remaining stake in Brazilian electricity company Companhia de Transmissão de Energia Elétrica Paulista (CTEEP). ISA spent around $535 million to take a 49.9% stake in CTEEP in June; it may have to stump up around $430 million to buy the remaining 50.1% share.

Colombia’s Central Bank has decided to hold the country’s benchmark overnight lending rate at 7.25%, the first move to hold it in the past four months. Unexpected deflation last month has allowed the Bank to take a break from the rate hikes, say analysts. In October, consumer prices fell by 0.14%, taking cumulative inflation to 4.0%, the lowest since 1955, and annual inflation to 4.2%.

Colombia’s Cementos Argos is out with a $480 million five-year loan through Citigroup and BNP. The senior unsecured term loan facility is heard priced at 137.5bp out of the box on a leverage grid. Some $310 million is earmarked for loan refinancing and the balance to redeem bonds.

Credit Suisse has said it is switching its Colombia exposure as the country’s sovereign curve “looks somewhat steep” versus comparable sovereigns. In a research note, the Bank commented that the long end of the Colombia curve has been lagging the 10-year sector in recent weeks and explained that the underperformance was partly due to the recent retap of the 2037 global issue, which had widened to the 2014 bonds by almost 20bps during the past month. The Bank said it plans to cover its short position in Colombian 2033 sovereign bonds by selling off an equal market weight of 2014 bonds, which appeared expensive. The switch will move the Bank’s portfolio to “a near neutral weighting in Colombia in DV01 terms”.

Seven companies have registered their interest in bidding for Colombian state-owned Ecogas, due to be privatized at the beginning of December. The government, which hopes to raise up to $1 billion from the sale, was due to close the tender process on November 24 but has extended the deadline to December 5 because of investor interest. Those who have paid to access the data room set up for the privatization of the natural gas transport company include Colombian state-controlled energy provider ISA, Colombian natural gas transporter Promigas, Bogotá power company EEB, Telmex, the IFC, Enbridge of Canada, and Prisma of the US. The government will announce a short-list on November 20.