Venezuela’s PDVSA missed a January 30 deadline to finalize its participation in the Abreu e Lima refinery joint venture with Brazil’s Petrobras after failing to secure a $10bn loan from development bank BNDES to pay for the transaction. Failing to offer BNDES the required loan guarantees, the Venezuelan company was unable to secure the financing for its 40% stake in Abreu e Lima located in Brazil’s northeastern state of Pernambuco, a $13.36bn joint venture that was formalized in December 2005, Petrobras says. At the time of the original signature, PDVSA and Petrobras expected the project to be completed in 2011. Late last year, PDVSA said it would secure loan guarantees from its Chinese partners to finalize its participation, but it is unclear whether that ever happened. Officials at PDVSA and BNDES could not immediately be reached for comment. Petrobras has said it plans to move ahead with the project with or without the participation from PDVSA. The project has on occasion been a stone in the shoe of diplomatic relations between both countries. Venezuelan President Hugo Chavez has often publicly complained about the slow pace of the transaction, blaming Petrobras executives and at one point denouncing the BNDES loan guarantees as unnecessary.
Category: Regions
Peru’s Central Bank Seen Leaving Rates
Peru’s monetary authorities are expected to leave the benchmark rate at 4.25% today, marking what would be the ninth consecutive month it has maintained a hands-off approach. Goldman Sachs notes that the economy has little need for any monetary stimulus, though the 4.23% year-on-year inflation remains outside the central bank’s 1%-3% band.
Digicel Sees Tight Trade
Digicel Limited has raised $250m in new 2020 bonds, landing its lower coupon since a 2009 issuance of 8.25% $800m 2017 bonds. The Caribbean telecom priced the 8NC4 notes at par to yield 7% or T+ 503bp in line with 7.00%-7.25% guidance. “Too tight and below fair value,” says one EM investor, who comped against Digicel’s existing 2017s, which were being quoted at 105 or at 6.65% on a yield-to-worst basis. Based on that, he calculated fair value at 7.6% calculated fair value without a new issue concession. Proceeds are marked for general corporate purposes. Citi, JPMorgan, Credit Suisse, Deutsche Bank and Barclays led the B/B1 rated transaction. The issuer sold the 2017 notes through Digicel Limited in December 2009 at an 8.50% yield, to fund a buyback of more expensive 9.25% of 2012 bonds. The bonds were trading at 100.25 on the break, says an investor.
CFE Raises 30-Year Money at Sub 6%
Fulfilling a long-held ambition, Comision Federal de Electridad (CFE) managed to raise 30-year money Tuesday, while also locking in what was arguably a record low coupon for a Mexican bond with this tenor, at least in the quasi-sovereign and government space. UMS’s 5.75% 100-year is perhaps its closest rival on this front. Whether CFE achieved its goal of pricing inside quasi sovereign peer Pemex is certainly open to debate, but the borrower was thought satisfied with a 5.75% coupon on its new long bond. Pemex 2041s were trading as tight as 253bp over on the interpolated curve and as wide as 260bp, depending on bankers’ views and biases. A new 30-year from Pemex was seen printing anywhere between 270bp to 278bp, after including an extension and new issue premium, with bankers away from the deal conceding that CFE arguably issued flat to the state-owned oil company. As with several other issues this year, weaker underlying secondaries in anticipation of new supply left bankers arguing over new issue premiums, depending on whether they spotted levels pre or post sell-off. Either way, premiums on CFE appeared in line with the 15bp that high-grade issuers have been paying of late. “CFE was wider in expectation of a deal coming to market,” says one rival banker. “It is hard to peg. I would say anywhere between 10bp-25bp, but let’s say 17bp which seems fair.” Some argue that in a market where rates are so low, talk of new issue concessions is nothing more than a chest beating exercises in light of where CFE ultimately priced. In the end, the price sensitive issue sacrificed some size for better pricing, coming with a $750m deal at 98.330 with a 5.75% coupon to yield 5.869%, or T+275bp, tight to whispers of high 200s. For some rival bankers, the relatively modest $2.1bn book size suggests that the deal was fairly priced, and indeed the bonds were up anywhere between plus 0.25 and 0.60 in the grey market heading into pricing. It is thought that the low dollar price was also
Mexican Judge Gives Final Nod to Vitro
Mexico’s Fourth District Court for Civil and Labor matters issued a final approval for Vitro’s debt restructuring plan. The troubled Mexican glassmaker is pushing forward with a $3.6bn debt restructuring that has angered bondholders. The court’s ruling in essence gives the company a stamp of approval for the proposal using the Mexican insolvency law, Vitro says. Despite bondholder opposition, the company has so far managed to approve the plan by using roughly $1.9bn in intercompany debt to give itself enough voting power to approve what has been largely an unpopular restructuring plan. As it stands, the company’s restructuring proposal includes $814.7m in new 2019 bonds, a fee of up to $32.7m and mandatory convertible debt of $95.8m. JPMorgan has estimated that creditors who accept the deal may recover between 48 and 60 cents on the dollar, depending on the level of debtholder support. Observers fear the restructuring could limit the financing options for other Mexican corporate issuers in the future.
Mexico Opens Window to Televisa- Iusacell Deal
Mexico’s anti-trust regulator has opened a window of opportunity for the potential approval of Televisa’s $1.6bn acquisition of a 50% stake in wireless provider Iusacell after saying it would reconsider its decision to block the transaction. “If the companies present agreements that resolve some of the competition problems” in the television advertising market that would result from the tie up, regulator (Cofeco) said it would authorize the merger. The announcement came just days after the regulatory agency officials voted 3-2 in favor of blocking the merger arguing that an incentive would exist to fix advertising rates. Iusacell is owned by billionaire Ricardo Salinas Pliego, who also controls TV Azteca, the second largest broadcaster in the country after Televisa. Iusacell’s deal with Televisa is seen as part of the company’s strategy he company to build its strength to compete with corporate titan Carlos Slim who controls roughly 70% of the telecom business in the country. In the acquisition as structured, Televisa has invested $37.5m in Iuscacell equity, and another $1.565bn in Iusacell convertible debt paying 2% with a December 2015 conversion date. Iusacell, Mexico’s third largest cellular services company, has already begun using the invested funds. At the time of the transaction, Barclays estimated the deal came in at a pricey 21x EV/Ebitda multiple, using Iusacell’s 2009 Ebitda of $150m. The Televisa’s ADRs remained unchanged on Tuesday at $19.88 following the regulatory announcement.
Investors Push on Caucedo Pricing
Dominican port terminal Caucedo is heard delaying its $180m 2022 after the borrower adjusted the collateral package on the bond and failed to agree on price levels with investors. Some anchors may still be on board, and leads are expected to clarify in coming days whether or not they will proceed. Overall, however, the buyside has already drawn a line in the sand at 9.50% amid talk of low double digits, essentially rejecting the 9.25% Caucedo had been heard targeting, say people familiar with the situation. Roadshows for the BB minus debut issuer were scheduled to end last week via leads Bank of America Merrill Lynch, Citi and JPMorgan. According to Fitch, proceeds were slated to refinance $97.8m in outstanding debt, and fund capex and yard infrastructure improvements. Funds were also earmarked to pay $50m in dividends. Pricing and use of proceeds may simply have been overly ambitious, says one banker. “This deal is a fundamental bet on global trade and global trade cycles which are very volatile and dependent on growth in the Dominican Republic,” notes one US-based investor. The island nation saw tourism revenues jump 3.5% to $4.36bn last year, the highest in recorded history, while also seeing a surge in FDI flows, according to JPMorgan. But this comes ahead of tight presidential race this year and at time when the country is still talking to the IMF about possibly extending the stand-by agreement for another 6 months as it waits for a final $500m disbursement from the Fund. “[It’s] tough with IMF loan expiring plus elections coming up, not to mention the shipping industry is a distressed industry,” the investor adds. Managed by DP World and located in PuntaCaucedo, 25km from Santo Domingo, the port is one of the largest port terminals in the Caribbean and the biggest container port terminal in the Dominican Republic.
Peruvian Cement Co. Makes ADR Debut
Peru’s Cementos Pacasmayo has priced a $264.5m equity follow-on, representing its debut ADR offering. The cement maker sold 20m ADRs, representing 100m shares, at $11.50 each, landing at the bottom of a $11.50-$13.00 range. It will raise $264.5m from the sale, assuming the exercise of a 3m ADR greenshoe. Its Peru shares closed Tuesday at PES6.85. The offer is seen as essentially being an IPO for the cement company, as its Lima shares are relatively illiquid. “It is a good story, though there may have been some concern about the size,” says a US-based equity investor ahead of the pricing. Buyers say they like the Peru growth story and that a great deal of Pacasmayo’s business is tied to retail sales for self-construction, which can offer higher returns. Pacasmayo is raising funds for the expansion of its La Rioja plant and also for the development of a phosphate and brine project. JPMorgan and Santander managed the transaction. Founded in 1949, Pacasmayo is one of 2 companies making up the Hocschild Group, along with Hocschild mining. Chairman Eduardo Hocschild’s Inversiones Pacasmayo owned 63.9% of Cementos Pacasmayo prior to the sale, and was set to have 52.7% afterwards, according to regulatory documents. The next large equity deal in the region is the BRL1.2bn IPO of Brasil Travel, scheduled for today.
S&P Downgrades Belize on Debt Payment Concerns
S&P has downgraded Belize’s long-term sovereign ratings to CCC+ from B minus after the country’s prime minister Dean Barrow raised debt service as an election issue. The prime minister’s party may ultimately reverse its campaign rhetoric if it regains power, but such talk raises questions about “the political commitment to timely debt service” following the nationalization of the country’s main electricity and telecom companies, the agency says. S&P also points to a weakening current account at a time when external financing options are limited. “We project Belize’s 2012 gross external financing requirement at 114% of current account receipts plus useable reserves,” it adds. Nationalizations dented investor confidence last year and had left some analysts fearing the added fiscal burdens and negative sentiment produced by such moves would eventually force Belize to restructure its so-called superbond due 2029 after defaulting just six years ago. Moody’s notes that coupons on the $546.8m superbond will step up in August to 8.5% from 6%, and that overall government interest payments will rise to 15% of general revenues. “The stable outlook balances the possibility that the government will seek debt relief to reduce a rising external interest burden against the possibility that debt management will improve after the general elections this year,” the agency says.
Cemex Ups Bid For Ireland’s Readymix
Mexico’s Cemex has increased its bid for a stake in Irish company Readymix that it doesn’t already own. Cemex has decided to increase its offer to EUR0.25 per share of Readymix from a previous EUR0.22 per share cash bid, the company says. Cemex currently owns 62% of the company, a Cemex spokesman adds, and is currently seeking to acquire the 38% stake remaining. Company officials could not immediately provide additional details. Officials at Readymix could not be reached for further comment. Cemex’s offer values the company at approximately EUR27.4m ($36m), as estimated using the company’s 109.6m shares outstanding. On Monday, Readymix shares trading on the Irish Stock Exchange closed at EUR0.22 per share or an implied market cap of roughly EUR24m.