Category: Mexico

A majority of LatAm finance managers surveyed by Fitch expect US growth of 1%-2% in 2008, indicating a slowdown that won’t become a recession. Those from Argentina, Mexico and Venezuela were among the most bullish – with more than 50% of respondents from those countries expect US economic growth to exceed 2%, the survey says. A clear majority of respondents also felt their country’s economy and businesses are now better insulated from a US slowdown than in the past. Most rank concern about their domestic economies above worries about the US and China. Most of the managers surveyed expect double-digit revenue growth and higher profit for their corporations in 2008 compared to 2007. The cautious optimism was also evident in their financing plans. More than 70% plan to borrow funds this year, with most indicating an inclination for domestic capital markets.

Mexico’s Central Bank Monetary Policy Committee has left the policy rate unchanged at 7.50%, in line with Wall Street forecasts. The accompanying policy statement was taken as relatively more dovish than in November. Goldman Sachs predicts that Mexico will likely keep the policy rate (TdF) unchanged at 7.50% for a relatively long period of time, possibly all the way through end-2008). “The higher risks for activity going forward (spillover from external shocks) and the widening domestic-foreign interest rate differential (we expect the Fed to push the Fed Funds Rate to 2.5% by 3Q2008) reduces the odds of monetary tightening despite still somewhat challenging inflation dynamics,” says Goldman.

Moody’s said it has lowered CIE’s rating to Ba3 from Ba2 on concerns about the Mexican entertainment industry’s future. “The gaming business, despite presenting one of the highest profit margins of CIE’s services portfolio, is vulnerable to an unpredictable regulatory and tax environment,” the agency said, adding that the commercial and entertainment divisions are deeply dependent on disposable income, which also faces downward pressure from the US and Mexican economic slowdown. While acknowledging the buyback was a positive step, Moody’s still finds too much of CIE’s cash generation to be dependent on its gaming business, which makes for an aggressive liquidity policy compared to peers.

On the same day it was downgraded to Ba3 by Moody’s, Mexico’s CIE launched an offer to buy back up to $186m in 8.875% notes due 2015. The entertainment operator has about $130m in excess cash, Jorge Padilla, investor relations director, tells LatinFinance. Last year CIE sold an interest in its local gaming operations to Spain’s Codere and sold off a controlling stake in its South American business. Padilla says that any additional funds needed to finance the buyback will come through a bridge loan provided by dealer-manager Citi. The offer of $1,025 per $1,000 in principal amount tendered runs through February 15. CIE will also pay a $30 premium for every $1,000 tendered before January 31.

Mexico’s central bank is expected keep the Tasa de Fondeo at 7.50% at its Friday monetary policy meeting. In addition, some analysts expect a softer tone regarding inflation in the press release that will accompany the decision. “We think that the Friday policy statement may have a more dovish feel than most recent ones even at a time the central bank may be far from easing monetary policy.” notes Credit Suisse. “Banxico might acknowledge higher downward risks to activity stemming from the increasing likelihood of a recession in the US,” notes Goldman Sachs.

Long-term debt financing to replace the 7-year facility supporting purchase of the first FARAC Mexican toll road concession is expected in the second half of 2008 or later, Pablo Garcia, director of project finance at Santander in Mexico tells LatinFinance. At least that amount of time will be needed to study the assets’ performance, he adds. A long-term bond is the likely instrument, with the main decision being whether to issue in pesos, UDIs or dollars swapped to pesos. Sponsors Empresas ICA and Goldman Sachs Infrastructure Partners won the concession last summer, and the groundbreaking MXP37bn financing led by Santander is now in retail syndication.

Mexico’s Grupo Modelo has teamed up with Canada’s Molson Coors Brewing Company to sell its beer in Canada. The pair established a long-term joint venture known as Modelo Molson Imports, to import, distribute and market the Modelo beer brand portfolio in all Canadian provinces and territories, effective January 1. The joint venture board will consist of 6 directors, half from Grupo Modelo and half from Molson, including Jose Pares, VP International Markets for Grupo Modelo, and Dave Perkins, Molson Coors Chief Strategy Officer. The 50/50 joint venture will be headquartered in Toronto and led by Robert Armstrong, previously CEO for Modelo in Canada.

Moody’s has downgraded GMAC Mexicana SOFOL’s local long- term debt rating to A3 from A1, and GMAC Financiera SOFOL’s to A3 from A1, it said. The action followed the agency’s downgrade of General Motors Acceptance Corporation ‘s long-term debt rating to Ba3 from Ba2. The rating outlook on GMAC rating is negative.

Moody’s has downgraded GMAC Mexicana SOFOL’s local long- term debt rating to A3 from A1, and GMAC Financiera SOFOL’s to A3 from A1, it said. The action followed the agency’s downgrade of General Motors Acceptance Corporation ‘s long-term debt rating to Ba3 from Ba2. The rating outlook on GMAC rating is negative.

Timber producer Agropecuaria Santa Genoveva has filed to sell up to MXP2.2bn in 20-year bonds, in one or two offerings. The notes are backed by zero-coupon bonds purchased from the federal government by a special purpose vehicle. Proceeds from the AAA (mex)-rated notes fund a timber project. BBVA will manage the offering.