Bogota-based multilateral FLAR has approved a 3-year loan of $514.5m for Ecuador, which will be used to finance the sovereign’s balance of payments. The loan has a one-year grace period and an interest rate of Libor plus a margin of between 3.6% and 4.0%. Last month, S&P raised Ecuador’s credit rating to B from B minus, citing the country’s growth prospects and the government’s willingness to pay debt. “The upgrade reflects the perceived improvement in the government’s willingness, as well as capacity, to service its debt due to improved financing options and higher oil production and economic growth prospects,” the agency says.
Category: Ecuador
Posted inDaily Brief
Ecuador Gets S&P Upgrade
S&P has raised Ecuador’s credit rating to B from B minus, it says, citing the country’s growth prospects and the government’s willingness to pay debt. “The upgrade reflects the perceived improvement in the government’s willingness, as well as capacity, to service its debt due to improved financing options and higher oil production and economic growth prospects,” the agency says. The public sector is able sustain higher levels of investment thanks to higher levels of financing from China combined with the increased oil revenues. The government’s improved relations with private-sector investors, especially in the oil and mining sectors, demonstrate the government’s more pragmatic economic policymaking stance. Real GDP growth was 6.6% in 2011, though is expected to moderate to just under 3% in this year. Ecuador’s recent history of default and inconsistent economic policies remain as credit constraints, the agency notes. The outlook is stable.
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Mexichem Reaches 95% of Wavin
Mexichem has increased its stake in Dutch plastic pipe maker Wavin to 95.7%, it says. Mexichem now will move ahead with plans to delist the company. The Mexican chemicals producer’s EUR10.50 ($13.30) per share offer was declared unconditional May 8, after it clinched 65% of Wavin’s outstanding shares. Mexichem has spent about EUR389 to increase its stake from an initial 22%. It is financing the acquisition with its own cash and through several credit lines.
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ACE Group Buys Ecuadorian Insurer Rio Guayas
Global insurance products company the Ace Group has acquired Ecuadorian insurer Rio Guayas Compania de Seguros y Reaseguros for $55m in cash. The deal enhances ACE’s already existing operations in the Andean country, ACE says in a note. ACE officials could not immediately comment on the deal’s valuation or advisors involved. Rio Guayas is a leading insurance and reinsurance company that offers life, auto, health and other insurance products to consumers in Ecuador.
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Luxottica Buys Brazilian Eyewear Maker
Italian luxury eyewear company Luxottica is moving to buy Brazilian eyewear company Grupo Tecnol, in a deal that gives it a foothold in a growing market. The company, which sells top brands such as Persol, Oliver Peoples and Ray Ban eyewear, will initially buy an 80% stake in Tecnol, with the remaining 20% to be acquired over a period of 4 years at pre-determined prices. The company estimates Tecnol’s enterprise value at EUR110m ($148.1m), but Luxottica officials declined to give additional information about the actual amount of the transaction, its valuation metrics or the advisors involved. The deal is expected to close in early 2012. Brazil’s growing middle class is an attractive client base for luxury brands and the primary reason for Luxottica’s foray into that market. Luxottica estimates that the South American country could soon become one of the top five markets for its wholesale division. Tecnol is a leader in the Brazilian eyewear business with net sales that reached the equivalent of EUR90m ($121.2m) in 2010, a compound growth rate of 14%.
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Ecuador Gets New Central Bank Head
Ecuador’s President Rafael Correa has named Pedro Delgado as the new central bank president. The change comes as part of cabinet shuffle, in which Jeannette Sanchez becomes minister of economic policy coordination. Finance Minister Patricio Rivera continues in his position.
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Pichincha Considers Dollar Bond
Ecuador’s Banco Pichincha continues to evaluate opportunities to issue a dollar bond in the international markets, says Pichincha general manager Fernando Pozo. Timing has yet to be determined, though a $100m bond is one of several options being considered. Active on the M&A front, the potential issuer has kept busy by purchasing assets locally and abroad. Over the last twelve months, it has snapped up targets in Ecuador from GAMC and Lloyds Bank and is currently eyeing buys in Spain. Pichincha works with NY-based M&A boutique investment firm Athelera and has yet to select banks for a potential bond transaction. Pichincha has issued shorter term dollar debt, but has yet to sell long-term debt internationally.
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Petroecuador Approves Merger of Subsidiaries
Ecuador’s state oil company Petroecuador has approved the merger of its Petroamazonas and Petroproduccion operating units as part of a long ongoing company restructuring. Petroamazonas, created from the nationalized assets of US oil company Occidental Petroleum in 2006, will absorb Petroproduccion, the exploration and production unit of the state oil company. Petroecuador hired Deloitte in 2010 to advise it in the restructuring process and the merger of these units stems from one of Deloitte’s recommendations, the non-renewable resources minister, Wilson Pastor, told a local daily earlier this week. The merger has already been implemented in some areas such as purchases and hiring and it’s expected to be completed by the end of 2012.
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Ecuadorean Dairy Plans IPO
Holding Tonicorp, an Ecuadorean dairy producer, is preparing an IPO to raise $74m-$87m, according to a broker managing the transaction. In what appears to be the country’s first IPO in at least five years, Tonicorp plans to float 30%-35% of itself, or 12.4m-14.4m shares, at an offering price of $6.00 each. The IPO is set to open on Wednesday. While bankers have been forecasting that borrowers are unlikely to come with more IPOs this year, they may have overlooked how small markets like Ecuador’s remain somewhat insulated from the broader turmoil abroad. Local brokerage Inmovalor Casa de Valores is managing. Tonicorp, controlled by the Alarcon family, owns Industrias Lacteas Toni, and also Plasticos Ecuatorianos and Dipor, which produce, package and distribute Toni’s dairy products. Combined sales from the 3 companies are forecasted at $274m next year, up from a projected $252m this year, and are expected to reach $380m by 2016.