Category: Mexico

Citi would rather not part with crown jewel Banamex, but the latest crisis may force its hand. Relatively, LatAm looks good versus the US and Mexico plays into Citi’s dreams of being the universal bank with geographic diversity and a lead position in higher growth markets. But Citi stock ended at $3.83 Thursday, down 15% on the day and more than 85% weaker year-on-year as some investors feared it was going the way of Lehman. The sale of Smith Barney proves Citi now has to part with erstwhile sacred cows, but the biggest challenge is finding a buyer with the $10bn-$20bn in cash that M&A experts say Banamex is worth. “The thinking is still to try to keep the Latin America banking franchise intact,” says Joseph Scott, banking analyst at Fitch. “That could change, it depends on the magnitude of the losses and if their backs are really against the wall then they might have to reconsider, say 3 or 6 months down the road,” he adds. There are very few possible buyers for Banamex, among them HSBC, Santander and JPMorgan. The latter just unveiled a 76% slump in Q4 profit, the Spanish bank is suffering Madoff exposure and HSBC is unlikely to spend 10%-20% of its net worth in a country where it already has thousands of branches. “I don’t think even Mexican captains of industry could put together that much money right now. Not without financing and you couldn’t get financing for a bank,” says a veteran LatAm banker. Some speculate that Itau or Bradesco could make a bid, but this also seems doubtful. “Really it’s tough to find buyers that would pay up for anything right now,” says Scott. Citi’s LatAm head Manuel Medina-Mora told LatinFinance in December that the region was essential to the global whole and that it would not be downsized. He did not answer requests for comment this week. Even if Citi keeps the region as is, there are nagging doubts about performance. “Earnings contribution in nominal terms is most likely to go down because they are facing more asset quality pressu

Mexico’s government expects to postpone construction of its planned Punta Colonet port on the Pacific Coast, the transport ministry says in a presentation posted on its website. The delay may be indefinite as interested bidders would likely struggle to finance the $5bn project. Transportation minister Luis Tellez says there is still interest in the port, but it is a question of timing, according to wire reports. The ministry is working with Citi and another US advisor to see if it is still possible. The port in northern Baja California was to feature an airport and rail links to the southwestern US and was slated as the single biggest project in president Felipe Calderon’s infrastructure agenda. Calderon launched a call for bids in August with much fanfare, and Mexico hoped to receive bids by January. The government still plans to proceed with other auctions this year, including a second Farac toll package, for which bids are due at the end of February.

Femsa is preparing a bond issue of up to MXP2bn in fixed and floating rate notes, according to S&P, which rates the transaction AAA on a national scale. The offer will feature a fixed rate tranche with a maturity of up to 5 years, and a tranche priced over the TIIE with a maturity of up to 2 years. Timing is not clear. HSBC and Banamex are managing the deal. The issue would be the second and third draws from FEMSA’s 5-year MXN10bn program. The brewer has a strong market position and strategic importance to Coca-Cola. But it faces volatility and country risks in its South and Central American markets, intense competition in the key Mexico operation, and exposure to commodity input cost fluctuations, S&P says.

Law firm Jones Day has made its first physical entry into LatAm by opening an office in Mexico City. A firm spokesman says that to enter the Mexican market, it integrated local firm De Ovando Y Martinez del Campo, with which it had worked with in the past. Now the Mexican firm will operate under the Jones Day name. Jones Day’s LatAm practice consists of approximately 50 lawyers, based in Mexico City, Madrid, New York, and around the world. The spokesman says that the firm chose to enter Mexico because “80% of our clients already have a presence there.” He adds that the firm is considering expanding into Brazil, but that no concrete plans have been made yet.

Mexican pharmaceuticals company Genomma Lab plans to launch next week a program to buy back up to MXP100m of its stock. The pharmaceuticals maker which went public in June 2008 has 530m shares outstanding. The shares closed Monday at MXP9.51, representing a decline of 41% since debuting at MXP16.

Bimbo’s relationship lenders – which in December put up $2.3bn to help the Mexican baker acquire assets from Weston Foods – are looking to reduce exposure by syndicating out $1.7bn in 3 and 5-year loans. Bankers hope the transaction will provide a price benchmark to a market sorely lacking order. The margin on the 3-year facility is Libor or TIIE plus 250bp, while the 5-year offers 300bp over. The club of lenders, made up of Bank of America, BBVA, Citi, ING, HSBC and Santander, are apparently requesting pro-rata participation on the two tranches. They are heard to be offering tickets of $212.5m that pay up front fees of 150bp for the 3-year and 175bp for the 5-year portions. Participants may lend in either MXP or USD, according to a banker close to the deal. People close to the transaction say they are pleased with the way things have gone so far with the MLA stage. “Bimbo is a top of the line company,” says a lender away from the deal. Elsewhere, the LatAm bank market is relatively busy for early January. Ternium is out with a $350m via Citi and Calyon, while miners Mirabella and Milpo are expected to reignite syndication efforts to try and close their respective transactions, launched last year. Cemex is meanwhile wrapping up a jumbo refinance.

Mexico’s finance secretary Agustin Carstens says Mexico will likely not grow in 2009, adding that if the US government implements a strong enough stimulus package, it could expand slightly. His prediction is similar to that of several shops. Credit Suisse expects GDP to rise just 0.6%, Merrill Lynch predicts 0.4% and JPMorgan sees no growth at all. Since 80% of Mexican auto industry exports go to the US, Merrill expects the slowdown in the US to hurt consumer spending, dent employment levels, cause a drop in real wages and a decrease in worker remittances. Credit Suisse says Mexico’s industrial output will contract by 2.2% in 2009, compared to a fall of 0.3% in 2008.

Mexico’s Ternium is heard looking to close a $350m 5-year amortizing loan this month. The deal through Calyon and Citi was launched in November and commitments are due by January 16. The average life is roughly 3 years. Only five banks are expected to participate. “I think it will be a club deal at the end of the day,” says a banker not leading the transaction. Integrated steelmaker Ternium, which has operations in Mexico, Argentina, the US and Guatemala is being marketed as a Mexican credit.

Shareholders of Su Casita have voted to suspend an agreement to sell to Spain’s Caja Madrid the 60% of the Mexican mortgage lender it does not already own. The decision was made “due to the global financial crisis, the volatility of the capital markets and the negative state of the global economy,” Su Casita says. To make up for some of the EUR215m the sale would have brought in, the shareholders also agreed to raise MXP500m in fresh capital during the first quarter of 2009.

Moody’s has chopped the long term Mexican national scale debt rating of Ford Credit de Mexico to Caa1.mx from Ba3.mx. The outlook is negative. The new long-term Mexican national scale rating indicates very weak creditworthiness relative to other domestic issuers. The cut comes after the agency downgraded parent company Ford Motor Credit’s senior unsecured rating to Caa1 from B3, with negative outlook.