By pricing a new $2bn 10-year benchmark, the United Mexican States (UMS) refreshed this point of the curve, coming with its lowest coupon ever despite competing supply from Brazil Tuesday. The $5bn plus book underscored the abundance of cash on the sidelines, especially for strong investment-grade sovereigns, even on a day when market favorite Brazil beat the UMS to the punch by announcing a retap earlier that morning. Strong US economic data certainly provided a boost to Mexico’s efforts, but accounts were also keen to get their hands on a new 10-year given that the 2020 benchmark was starting to look long in the tooth. Indeed UMS hadn’t been in the market with a bond of this tenor since February last year when it retapped the 5.25% 2020s for another $1bn. Mexico felt it had a large enough audience to move forward Tuesday morning, ideally targeting a $1.5bn trade. Size was seen as priority as Mexico wanted to create a large liquid benchmark out of the box. Anticipating more sovereign supply from other corners of the EM universe, it was also thought wise to move forward sooner rather than later. Emerging with whispers of 180bp over UST, the borrower eventually launched a larger-than-expected $2bn deal at a tighter 175bp, and eventually priced at 99.322 with a 3.625% coupon to yield 3.706%. The spread was wider than the 150bp achieved on Brazil’s $750m retap of its 4.875% globals due January 22 2021. The maturity differential with Mexico’s March 2022, the extra cost of a new benchmark bond and the larger $2bn size – one of the sovereign’s single biggest trades ever – was seen justifying the extra spread. Besides, Brazil now typically trades inside the UMS, which has been weighed down by its connection to the US economy and arguably doesn’t hold the same rising-star status as its South American peer, at least in some investors’ minds. With the 2020s trading at around 155bp over the interpolated curve, the new UMS bond came with a 20bp new issue premium, or arguably ju
Category: Regions
Chinese Firm Outbids Brazilians for EDP Stake
China’s Three Gorges managed to outmaneuver its Brazilian rivals and won a coveted 21.35% stake in Energias de Portugal (EDP). The Chinese company paid EUR2.7bn ($3.5bn) for a package of 780m shares or EUR3.45 per share sold. The price offered came at a 53.6% premium over the share price registered on December 21, says Parpublica, the Portuguese state-owned holding company responsible for the sale. Officials at Parpublica and Three Gorges could not immediately be reached for additional details. China’s successful bid beat three other rivals for the assets, namely Brazil’s Cemig and Eletrobras, as well as Germany’s E.ON, but no details were immediately available on the other offers. The Portuguese utility company is a major player in Latin America with a whole portfolio of power generation and distribution assets in Brazil, one of the most interesting aspects of the acquisition for the Brazilian utilities involved in the process.
Europe Casts Shadow Over 2012 DCM Prospects
An upbeat mood in the European stock markets Monday set a positive tone for the start of 2012, but the uncertainty over the continent’s debt problems are expected to dampen LatAm cross-border bond volumes this year. If sentiment continues to improve, however, bankers are preparing for another round of local currency trades as well as a wave of project bonds, not to mention big dollar trades from the likes of Petrobras. “We expect lower issuance in the first half of the year due to European driven volatility in the secondary markets, reaching more normal levels over the course of the year,” says Anne Milne, head of global emerging markets corporate credit at Bank of America Merrill Lynch (BAML). Milne forecasts $70bn in new issuance from LatAm in 2012. That is a slight drop from the $75bn she calculated for the entire 2011, but far off the $93bn estimated with Dealogic data. Either way, most DCM bankers are hard-pressed to predict record issuance in the year ahead. “In the best case it will be flat to 2011,” notes one LatAm syndicate head. “From what we’ve seen from August 2011 onwards, it will continue with windows opening and closing.” Taking a bet on how the situation evolves in Europe, borrowers may want to wait for better pricing. The sale of dollar assets by European financial institutions could weigh on pricing for credit overall, and indeed create more supply in the bond markets as corporates seek funding alternatives. While many LatAm corporates can afford to wait, high-grade issuers with big capex needs like oil companies Petrobras and Pemex are sure to make another round in the dollar markets this year. For now, however, the market is closed to junk names, with exception perhaps of interesting or rare BB credits. Volatile FX markets also raise doubts about more global local currency trades, though several such mandates mean a relatively large pipeline. This comes after a mini revival in the asset class last year. “Local currency made a comeback. We saw $8.
Mexichem Ups Wavin Bid, Gains Access To Books
Mexichem raised its offer over the holidays for plastic pipe systems manufacturer Wavin, which in turn allowed the Mexican company access to its books. Mexichem is now offering EUR10 per share for Wavin. This comes after a series proposals including a EUR9 offer on Dec 6, and EUR8.5 per share on November 22. Wavin directors have decided that the negotiations have shown “good progress” in a number of “non-financial” terms and considered that the latest offer merited “access to due diligence information,” the company says. Officials at Mexichem and Wavin could not immediately be reached for comment. The latest offer values Wavin at an enterprise value to Ebitda of almost 8x, assuming 50.8m outstanding shares valued at EUR507m, net debt between EUR300m and EUR330m, and Ebitda of EUR100 to EUR105m, according to people familiar with the deal. The negotiation has also involved a number of corporate governance issues including the management makeup post acquisition and details regarding employee rights, according to a person with knowledge of the negotiation. Another issue is Wavin’s leverage which stands close to bridging established debt covenant levels, the person notes. Barclays and Citigroup are serving as Mexichem’s advisors, while Bank of America Merrill Lynch is advising Wavin.
Sacyr Sells Stake in Chilean Concessions
Spanish construction company Sacyr has decided to sell 49% of two Chilean motorway concessions to the family offices of Chilean retailer Falabella group. The stakes were sold for a combined EUR177.2m ($231.2m), Sacyr says. Corso and Auguri, both part of the Falabella group, paid EUR120.7m for a stake in the Concepcion-Cabrero motorway concession and EUR56.5m for the Accesos a Iquique motorway. Officials at Falabella and Sacyr could not immediately be reached for comment. In November, the construction company secured a EUR276m financing agreement with Chile’s Corpbanca to fund construction of its motorways. On another front, earlier this month Sacyr sold a 20% stake in Repsol back to the energy company and was left with a 10% stake. The sale came after Sacyr had teamed up with Mexico’s Pemex to attempt a management change in Repsol.
Santander Makes New York Cuts
Santander was heard laying off some 15 people in its New York offices in December, including Marcia Vorona, an executive director in the LatAm structured finance group. Vorona joined Santander from ABN Amro in late 2008 after an RBS-led consortium took over the Dutch bank. This follows a series of LatAm cuts at other European institutions such as ING and RBS as they move to comply with Basel III rules and set aside more money for capital requirements to protect against the continent’s ongoing debt crisis.
PetroLatina to Borrow up to $100m From BNP
UK-based PetroLatina has secured an up to $100m 4-year revolving credit facility through BNP Paribas, it says. The loan will be used to repay an existing facility with Macquarie and help fund its oil and gas operations in Colombia. PetroLatina has already secured $36m, $29m of which went towards existing facility repayment and Macquarie price hedging contracts. Interest will be paid at Libor plus 4.5%. UK-listed PetroLatina operates in Guatemala and Colombia.
Banco Multiva Preps MXP Issue
Mexico’s Banco Multiva has filed a shelf to issue up to MXP5bn ($361m) in bonds It does not give details about the timing or exact amount of the first sale. Proceeds of the deal will be used to fund bank operations. The issuances under the program will be self-led.
Rusoro, Venezuela Extend Compensation Talks
Venezuela has decided to extend a 90-day period for talks with gold miner Rusoro as it decides how much to pay the company for its nationalized assets. The size and form of compensation remain unclear at this stage, but a person familiar with the situation tells LatinFinance that depending on the gold price used, the company values its assets at roughly $1bn. Rusoro and Venezuelan officials could not immediately be reached for comment. The parties have agreed so far to extend the talks to March 14 to decide on a way forward. So far discussions have revolved around the possibility of Rusoro selling all of its assets to the state with a second option of keeping a 45% stake in a new venture controlled by the government. Negotiations hinge on Venezuela’s decision to pay compensation based on unamortized book value for assets that Rusoro acquired gradually at fair market prices. Venezuela’s government passed a law in September to keep gold extraction in the hands of the state. As such, all mining companies must transfer assets to a new entity and accept a minority interest of as much as 45% of the new business, with the government in control. Rusoro is a mining vehicle founded by Vladimir Agapov and his son Andre, two Russian businessmen who spent years acquiring mining properties in Venezuela under the administration of President Hugo Chavez. In recent weeks Venezuela has moved to finalize compensation agreements with a number of companies affected by the president’s nationalization campaign.
BBVA Chile Sees MXP Bond in 2012
BBVA Chile is now targeting early next year for its entrance into the Mexican bond market, a deal it had aimed to do this month, says a banker on the deal. The bank hopes to raise MXP1.5bn ($111m) in 3-year floating rate bonds, targeting pricing of around TIIE+60bp. Chilean peer Banco de Chile recently priced a MXP1.5bn 3-year at the same level. BBVA Chile would become the fourth Chilean issuer to tap Mexico’s domestic market, and is looking for an alternative source to raise funding for the bank’s operations. BBVA Bancomer is leading the transaction, rated AAA on a national scale.