Venezuela’s government plans to pay $600 million to Mexico’s Cemex as compensation for the assets it lost to a nationalization campaign in 2008, with a large portion to be settled using debt issued by state-owned oil company PDVSA. The deal also contemplates paying the company an additional $154m for accounts payable that Cemex subsidiaries owed to its parent at the time, the Mexican cement company says in a statement. As agreed, Venezuela will make an initial payment of $240m in cash and $360m in “various negotiable securities issued by PDVSA,” Cemex adds. Cemex officials could not immediately be reached for comment. It remains unclear what PDVSA instruments the company accepted as payment, what their face value is and what kind of discount the company calculated in accepting the paper. Some analysts that follow the situation believe the company may be receiving shorter maturity paper and may not get the full $360m if it chose to sell that paper immediately. PDVSA’s 2013 bonds, its shortest paper, currently trades at 95, yielding 11.2% as of Thursday. The PDVSA 2014s trade at 78 or at 14.9% on a yield basis. It remains to be seen if Cemex must hold on to the bonds until maturity to get the $360m owed or if it can monetize that amount by selling the instruments sooner. Cemex lost its Venezuelan cement assets in April 2008, when President Hugo Chavez decided to force foreign cement makers into minority partnerships with the government. Lafarge and Holcim went along, but Cemex rejected an original $650m purchase price as too low and took Venezuela to international arbitration through ICSID.
Category: Regions
Pemex Preps Debut GDN
Mexico’s Pemex is heard looking to pay Mbonos + 135bp-140bp on a MXP5bn ($367m) 10-year global depository note (GDN) as it tests investor appetite for a structure that has so far only been sold under a purely sovereign umbrella. The government controlled oil company is authorized to issue up to MXP10bn, but is heard preferring a size closer to $500m equivalent. GDN programs have been created for a handful of sovereigns, most notably Peru, but up until now corporate credit has not been sold under this format. The idea is to give foreign investors access to local currency markets but with 144A/RegS instruments that are Euroclearable and also pay interest and principal in US dollars. As with ADRs, the GDN structure gives holders the flexibility to move between international and local markets. Hence, Pemex’s decision to choose such a format may seem unusual given that international accounts are already large buyers of Mexico’s local sovereign paper, but for the oil company this may be an opportunity to broaden its investor base. “My guess would be investor diversification, market expansion with no incremental cost,” says a rival syndicate head. Citigroup is serving as depository bank for the local Mexican transaction, rated AAA on a local scale. Book building starts today with settlement scheduled for December 7. Pemex (Baa1/BBB/BBB) has mandated HSBC, Morgan Stanley and Santander for the GDN transaction.
Talk Heard on CFE MXP Trade
Mexico’s Comision Federal de Electricidad (CFE) is heard looking to pay TIIE+ 25bp for a new MXP1.358bn ($99m) floating-rate bond. The 4-year notes have an estimated issuance date of December 9, and will raise funds to cover infrastructure project expenses. The deal would be the fourth issuance under the Fideicomiso de Administracion de Gastos Previos (FAGP) trust, which is authorized for up to MXP3bn. The FAGP trust was established in August 2003 with Bancomext acting as trustee. The state-owned utility uses the FAGP trust to pre-fund subcontractors’ authorized expenses under a special infrastructure program that cannot be reimbursed before project completion. Ixe is managing the transaction, rated AAA on a national scale. CFE most recently visited the domestic market in September when it raised MXP7bn from a reopening of its 2014 and 2020 bonds, after seeing more than MXP13bn in demand.
Glencore Abandons Peruvian Mine Deal
Swiss commodities trading company Glencore has withdrawn a $475m offer for CST Mining Group’s interest in Peruvian copper project Mina Justa, following a failure to agree on an offtake deal, say people close to the transaction. The global trader agreed on July 18 to buy CST Resources, which holds a 70% stake in the owner of Mina Justa, Marcobre, pending a number of conditions that included giving Glencore access to the mine’s future production. Declining to provide further details on valuations or advisors, a Glencore spokesman would only say the deal fell through since “it failed to satisfy all conditions”. The company said as much to analysts, some of whom saw it as a positive development for the trading company. It seems “CST just wanted too much money for the off-take agreement. Glencore’s pullout suggests the company is very disciplined in terms of its transactions,” Morgan Stanley’s Aneek Haq tells LatinFinance. Analysts believe the deal fairly reflected the price for a mine that is not yet productive. Liberum Capital estimates the $475m transaction had an implied enterprise value to reserves, taking out capex, of $0.54 per pound. This was lower than Vale’s $1.13bn offer for African miner Metorex in April, which Liberum estimated at $0.94 per pound. Liberum’s Dominic O’Kane points to Glencore’s declining share price, which may have also dampened incentives to complete the transaction. Glencore’s shares closed at GBP398.5 on Wednesday, off 18.3% from its July 18 level, but still up 4.84% since Glencore announced it would walk away from the CST buy.
Rabobank Watches Europe, Holds CLP Sale
Dutch bank Rabobank has delayed its plans to sell UF2.5m ($105m) in 5-year bullet bonds in the Chilean market. Expected to issue today, the bank has chosen instead to see how the situation in Europe evolves, says a person familiar with the deal. A UF-denominated tranche is expected to have a 3.05% coupon, and a peso tranche a 6.05% coupon. Proceeds will be used to fund the bank’s operations. The bond is rated AAA on a national scale. Celfin and Deutsche Bank are managing.
Pacific Rubiales Gets Nearly All Early Converts
Pacific Rubiales has converted CAD236m ($232m) of its convertible debentures via an early conversion offer that drew participation from holders of 98.9% of the 8% 2014 bonds. In the process it will issue 20.5m shares, of which 2m represent an incentive payment to accepting holders. For each CAD1,000 ($988) face value tendered, the Toronto-based Colombian producer offered face value in shares plus 86.7533 additional shares. This compares to the original conversion rate of 77.94 shares per CAD1,000 face value. The offer closed Tuesday. Pacific Rubiales says it is undertaking the offer “to bring maximum balance sheet flexibility to carry out its acquisition strategy. RBC managed the process.
Urbi Price Talk Heard
Mexican homebuilder Urbi Desarrollos Urbanos (URBI) is heard looking to pay TIIE+ 350bp area on a MXP1bn ($74.5m) 2014 bond. Issuance has been tentatively scheduled for next week. Proceeds will be used to refinance debt and for general corporate purposes. The offering is rated A- on a local scale. BBVA is managing the sale.
BCP Signs $150m China Loan
Banco de Credito BCP has signed a 5-year $150m loan with China Development Bank, marking the Peruvian bank’s first such transaction with CDB. The move represents an opportunity for financing and also for strengthening relationships with China, says BCP. The spread over Libor was not disclosed.
AMX to Test Dim Sum Market
America Movil (AMX) has mandated HSBC to arrange 2-day fixed-income investor meetings in Asia starting next week amid expectations that the veteran LatAm borrower may try its luck in the so-called dim sum market as it seeks out new pools of liquidity. “There is a lot of money in Asia and issuers are continuing to look at ways to access those markets,” says one DCM banker. “AMX is consistent with diversifying its financing needs and is a more sophisticated borrower with an uncanny ability to read the tea leaves.” This comes just a month after AMX broke new ground by debuting in the Japanese market and becoming LatAm’s first corporate issuer to sell a Samurai without a JBIC guarantee. Now the Mexican telecom may well be the first to test Asian investors’ appetite for RMB-denominated paper from LatAm credits, though Brazilian names such as Bradesco and Vale have also been heard considering such an option. Given the deep pools of liquidity in Asia, it makes sense that borrowers with large capital needs such as AMX are considering engaging investors there as they look to diversify their funding bases and ease pressures on core dollar markets. “AMX has significant capital requirements so there is only so many times it can tap the USD and EUR market,” says another DCM banker. According to a banker familiar with the RMB-denominated market, dim sum issuances have varied in size between $30m-$200m with tenors ranging between 2 to 4 years. In 2010, McDonalds became the first non-Chinese entity to issue a dim sum bond, selling a relatively small RMB200 million ($29.5m) 3% 3-year. Last year companies placed 30 dim sum deals totaling RMB40bn. Volumes are expected to exceed those levels in 2011 with some bankers believing that the dim sum sector will become a core funding source for many borrowers in 20-30 years time. “It’s a nice way for AMX to make foothold now,” a banker says. The A2/A minus/A rated company will hold meetings in Singapore on Monday, December 5 before wrapping u
Bancolomia Mulls $150m Sura Investment
Bancolomiba is considering a $150m investment in pension and insurance assets that Grupo Suramericana recently acquired from ING, the bank says. Sura had indicated the possibility that the bank would participate as a co-investor along with the IFC, Sociedades Bolivar and UBS, its advisor on the acquisition. Bancolombia acted as bookrunner on the recent COP3.5trn ($1.8bn) equity follow-on that helped fund the purchase of ING’s assets. “The operation is an interesting business opportunity, aligned with the ongoing interest that Grupo Bancolombia has in strengthening its presence in the financial sector, including pensions,” it says. Final details are still to be determined. Sura brought in the co-investors as its follow-on fell short of a COP3.9trn target. UBS came in for COP975bn, Bolivar for $400m and the IFC $200m. Sura agreed to buy the ING assets in July for $3.76bn.