BBVA Colombia has sold COP353bn ($192m) in domestic subordinated bonds, upsizing the transaction by COP53bn. A COP95bn 2018 tranche pays IPC+4.28%, a COP106bn 10-year tranche pays IPC+4.45%, and a COP152bn 15-year portion pays IPC+4.60%. BBVA led the deal, rated AAA on a national scale. Titularizadora Colombiana is set to follow Wednesday with a COP278bn RMBS offer, and Banco Occidente is expected Thursday.
Category: Regions
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Mexico DCM Slowing Likely
Mexico’s domestic bond market could see issuance put on hold given continued market volatility, bankers say, with many waiting to see if a CFE transaction gets done today or tomorrow. “There is no clear sign but there is a possibility issuance may be delayed for another 2-3 weeks,” notes a Mexico-based banker. Last week, Pemex postponed issuance of up to MXP15bn ($1.14bn) in bonds because of poor market conditions. “Issuers may have the same mindset as Pemex,” notes a second banker. Mexican builder ICA and Mexican utility Comision Federal de Electricidad (CFE) both have plans to issue domestically this week, with CFE looking at a reopening its 2014 and 2020 bonds and Mexican builder ICA through two subsidiaries looking to issue up to MXP8.3bn ($632m) in asset backed bonds. “ICA and CFE are expected to issue to week but it has yet to be seen if it will happen,” notes a third banker. Mexico’s Banco Compartamos and Ford Credit de Mexico also have scheduled issuance for this week for up to MXP2bn and MXP1bn issuance respectively. Both issuances are floating rate bonds paying a spread over TIIE. “Everyone is waiting to see what will happen with CFE before deciding what to do next,” adds another banker. Bankers on the CFE deal expect pricing on Tuesday or Wednesday of this week. Mexican investors are keeping close tabs on US and European markets and are being selective. “There is tremendous risk aversion at the moment and we still remember Pemex and CFE bonds reaching 100bp over TIIE in 2008,” adds an investor.
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Canadian Miner Adds Mexican Project
Canadian gold producer Agnico-Eagle agreed to buy Mexico’s Grayd Resources in a deal valued at approximately CAD275m ($277m). The project is about 70km from Agnico-Eagle’s existing Pinos Altos operation, and could produce 92,000 ounces for nine years, says an analyst. David West, an analyst with Salman Partners, notes that the company, which is paying CAD 2.80 per share, a 65.7% premium to the average price for the 20-day period ending September 16, is in part paying for the exploration potential, making it hard to say at this point if the deal is fair value. “You’re paying for the exploration potential,” he says. “I think at the end of the day, you’re going to find that Agnico realized a good value in this acquisition,” he adds, highlighting the amenable mining location Mexico provides. He said he expects Mexico to remain a top area for mining activity. “It’s one of the better areas, period.” Agnico-Eagle retained TD Securities as its financial advisor, and Grayd was advised by Canaccord Genuity, and law firm Cassels Brock & Blackwell.
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CFE Eyes MXP Issuance
Mexico’s Comision Federal de Electricidad (CFE) is indicating pricing of TIIE +20-25bp for its retap of 2014 bonds, according to market participants. The state-owned electricity provider is reopening for the second time the domestic floating rate 2014 and fixed rate 2020 bonds, with pricing expected as soon as today or Wednesday. It does not yet indicate the amount. It originally sold the 2014 notes with a MXP5bn ($380m) size and the 2020s for another MXP9bn in December before reopening in January for MXP4bn each. The 2014 is a floating rate bond paying the TIIE plus 26bp, and was reopened in January at 100.338. The 2020 pays a fixed 7.96% coupon and was retapped at 97.808. CFE is raising the funds for general corporate purposes. Banamex, BBVA Bancomer and Ixe are managing the sale, rated AAA on a national scale.
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Bladex Mandates, Awaits Window
Banco Latinoamericano de Comercio Exterior (Bladex) has mandated banks for an international bond offering and is considering tapping the markets soon if conditions are favorable, Christopher Schech, supranational bank’s CFOs tells LatinFinance. With 5 to 7-year bond funding, the supranational bank can better insulate itself against volatility and be ready to compete should markets close as they did in the wake of the Lehman debacle. Size would need to be in line with the market’s liquidity requirements, likely $150m-$200m. Schech declines to name the banks Bladex has hired. The bank has several funding sources, including deposits, and most recently it has tapped the syndicated loan markets in Asia, achieving 3-year tenors. With an EMTN program already established, the bank can issue in any currency, though it always swaps back to dollars. Apart from market volatility, the new dollar bond is complicated by the need to come in size to satisfy investors’ liquidity needs and then having to find a home for the proceeds in Bladex’s lending portfolio. “You would need to know where funding is going on a matched funding basis,” says Schech. Bladex is also considering a local market foray in Mexico, but timing very much depends on suitable windows in the swap market.
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China to Play Bigger Role in Domestic Growth
China is not only Brazil’s largest trading partner, but it now represents the third-largest source of FDI flows into the country, says Persio Arida, a managing partner at BTG Pactual’s asset management group. A former Brazilian central bank governor and ex-president of the country’s national development bank BNDES, Arida emphasized the strength of LatAm’s domestic demand as a driver of the region’s economy, a fact that Chinese investors are increasingly heeding. “People see [LatAm] as an export oriented economy, but that is not true,” Arida adds. “With the exception of Mexico, domestic demand is growing faster than GDP. It is a process China will go through, but it is already happening [in LatAm]. This does not mean commodities are not important, but LatAm is less affected by trade than most people imagine.” This comes as Chinese companies start to look beyond commodities and increasingly focus on manufacturing investments as well. For instance, car company Chery Motors, air conditioning manufacturer Gree, and motorbike manufacturer Zongshen have all set up shop in Brazil. “Our strategy was to purchase a local Brazilian brand called Kasinski, and we have tried to make Brazil our base for South America,” says Ying Zuo, senior vice president, overseas business, at Zongshen Industrial Group. The region’s low savings rate will mean that it will continue to depend on foreign capital from high-savings countries such as China. “LatAm will need foreign savings and must be open and friendly to foreign capital,” adds Arida. Arida and Ying spoke last week at LatinFinance’s 3rd Latin America China Investor Forum in Beijing.
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CSN Scraps Spanish Agreement
Companhia Siderurgica Nacional (CSN) has backed off its May stock purchase agreement with Grupo Alfonso Gallardo to acquire two steelmakers and a cement company from Spain’s Grupo Alfonso Gallardo for EUR946m (S1.34bn). The deal, which included Cementos Balboa, and steelmakers Corrugados Azpeitia and Corrugados Lasao, was terminated “due to contractual breaches by Grupo Gallardo,” CSN says. The move frees up some funds at a time when CSN’s domestic ambitions have been in the headlines. Last week CSN denied rumors that it was making offers for a 26% stake in Brazilian peer Usiminas, of which it holds 15.15% of the preferred shares and 11.29% of its ordinary shares.
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IDB to Encourage Chinese Participation on A/B Loans
The IDB is trying to encourage Chinese commercial banks such as the ICBC and the Bank of China to participate in Latin American A/B loans, Hans Shulz, general manager of structure and corporate financing at the development bank, tells LatinFinance. Such banks have yet to participate in these types of syndications, but may be willing to lend on this basis, especially if the borrower has a connection with China. “They will look for Chinese links. They see this as a region that continues to grow,” says Shulz. LatAm financial institutions have increasingly tapped the syndicated loan market in Asia, luring banks from China, Taiwan and Japan.
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Marfrig Preps Sale of QSR Assets
The Martin-Brower Company is offering to pay $400m to acquire Brazilian food company Marfrig’s quick service restaurants (QSR), logistics assets and other business from its subsidiary Keystone Foods. By divesting these assets, Marfrig and Keystone hope to focus on their core protein businesses. The company says that it will keep its position in the recently announced joint venture with Cofco as it looks to develop its logistics business in China. “Our distribution business is world class,” Larry S. McWilliams, CEO of Keystone Foods, said in a statement. “However, we feel that by strategically focusing our resources on our proteins business, we will be able to add greater value to our customers in the QSR market.” The sale is still subject to regulatory approvals and due diligence.
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BBVA Set to Lead Week of COP FIG Issuance
BBVA Colombia is scheduled to sell COP300bn ($166m) in domestic subordinated bonds today, upsizeable to COP500bn. The bank is looking at a 7-year tranche paying IPC+4.3%, a 10-year paying IPC+4.6%, and a 15-year paying IPC+4.8%. BBVA is leading the deal, rated AAA on a national scale. Titularizadora Colombiana is set to follow Wednesday with a COP278bn RMBS offer, and Banco Occidente could also pull the trigger on a deal as soon as this week. Additionally, Helm Bank has approved a COP2trn 3-year shelf to issue additional debt.