More foreign issuers are likely to try to tap the local Mexican markets in coming months given the attractiveness of the rate and swap environment, Ricardo Velazquez, managing director of the financial institutions group at Banorte-IXE, tells LatinFinance. “Rates are on the decline and the market has discounted some of that,” adds Velazquez. “We have never seen these kinds of rates and it is very stable.” This comes after recent MXP issues from several European banks as well as Chile’s Banco de Credito e Inversiones (BCI). Mexico’s interbank rate TIIE was being quoted at around 4.75% Friday, but according to Velazquez was recently as low as 4.60%. Since mid-August though, issuance has been slow, with Pemex recently putting off a domestic sale that could have reached MXP15bn ($1.16bn) in size. Others awaiting issuance include Ford Credit, Banco Compartamos and ICA, but bankers are able to give little indication of when the pipeline is likely to resume.
Category: Regions
Colombia Seeks to Facilitate Local TES Purchases
The Colombian government is seeking ways to facilitate foreign investment in its local treasury or TES market, German Arce, the country’s head of public credit, tells LatinFinance. At the moment, foreigners largely stick to Colombia’s Global TES market rather than expose themselves to the complexities and costs of investing locally. But the government is trying to change that. “How can we create conditions for foreign investors to buy local TES?” asks Arce. “We are going through the process of tax reform, in which we want to understand how we can provide a non-biased tax treatment. Today it is negatively biased for external investors.” The idea is to simplify local tax regulation and take away the uncertainties of investing in the local market. “[Regulation] is not unfriendly but complex. We are trying to simplify tax and financial regulations,” Arce adds. Tomorrow, Colombia is scheduled to offer holders of COP39trn ($21.5bn) in 5 series of domestic bonds the opportunity to exchange for 3 series of longer-dated bonds, including a new 2026.
Occidente Launches Second Round for FO
Colombia’s Banco de Occidente has launched the order period for the second round of its COP200bn ($112m) sale 6.06m shares at COP33,000 each. Buyers came in for 5.49m shares in the first round, indicating the raising of COP183bn so far. The offer closes in 15 days. The bank’s own brokerage and Deceval are managing the sale. Retailer Grupo Exito is also in the Colombian market at the moment, scheduled to close its COP2.502trn ($1.40bn) equity follow-on Friday.
BP Increases Brazilian Biofuel Stakes
BP will spend $96m to increase its stakes in Brazilian biofuel producers Companhia Nacional de Acucar e Alcool (CNAA) and Tropical BioEnergia. The London-based oil and gas company agreed to pay $71m to buy the remainder of Tropical BioEnergia from joint venture partners Maeda Agroindustrial and LDC-SEV Bioenergia. It had originally held 50%. It has also agreed to pay $25m for an additional 3.0% of CNAA, bringing its position to 99.97%, following the purchase of a majority stake in April.
Colombia Weighs Carry Costs
Colombia sees the US dollar market as providing the best opportunities, but is unlikely to tap the debt markets anytime soon, German Arce, Colombia’s head of public credit, tells LatinFinance. This comes after Arce and president Juan Manuel Santos met with Japanese banks this week to analyze a possible new Samurai bond. “A Samurai is a natural way of getting into the Asian market. There are discussions about cost and whether costs are reasonable to go back to the Samurai market. [For now] the dollar market is providing better opportunities,” says Arce. In theory, the sovereign has just $240m left in external financing, though it already has this covered and it is no rush to tap the market, or pre-finance the estimated $3bn in amortizations due next year. With rates still low in the dollar market, Colombia has been weighing the carry cost of raising money now against waiting until a later date. “As long as rates are low obviously the carry cost will be minimized,” Arce says.
Ecopetrol Sits on Sidelines
Colombia’s Ecopetrol has no plans to issue additional equity or debt in either the international or local markets this year as the company has sufficient resources to fund capex and operations, CFO Adriana Echeverri tells LatinFinance. “Currently our [cash] position is $4.3bn and oil prices are way beyond our projected $65 dollars per barrel, so we are not requiring additional funding,” she says. The state-controlled oil producer has an $80bn capex plan for the 2011-2020 period, of which 65% will be funded with internal cash, 25% with debt and 10% equity, including funds raised in an equity follow-on last month. The recent follow-on fell short of its COP2.5trn target ($1.4bn), raising COP2.40trn, though the result has not altered the company’s plans. “The requirements for the company in local currency were COP2.5trn and the shortfall is not much so we are not thinking about additional equity,” Echeverri adds. The company has no timeline for its next round of equity sales, she says, noting the government still needs congressional approval to sell a 10% stake in Ecopetrol.
Leasing Bancolombia Raises Local Bond
Leasing Bancolombia has sold COP400bn ($166m) in local bonds, upsizing from COP300bn. The arm of Bancolombia placed a COP79.8bn 2013 tranche paying DTF+1.85%, a COP95.3bn 2014 tranche paying IPC+3.45%, a COP101.5bn 2017 piece paying a 7.70% fixed rate, and a COP156.4bn 2022 portion paying IPC+4.54%. Total demand reached COP630.8bn. Bancolombia managed the sale, rated AAA on a national scale. Titulizadora Colombiana, BBVA Colombia and Banco Occidente are all slated to issue next week.
Lamosa Rolls Over $650m
Mexican home improvement products retailer Lamosa has refinanced $650m in debt tied to its 2007 acquisition of Porcelanite. The new debt includes a $450m 6-year dual-currency loan paying TIIE/Libor+150bp-300bp, depending on the company’s leverage levels. Lamosa also paid off $70m of its $225m second lien loan, with the remaining $155m replaced with a new 7-year subordinated loan. Scotia and Inbursa led, with a group of 5 more banks participating. Scotia had led the 2007 syndicated deal, including a $675m dual-currency loan paying Libor/TIIE+200bp, and a $75m 3-year revolver. The second lien loan had been separately negotiated at the same time with the Ontario Teachers’ Pension Plan.
China Looks Beyond LatAm Resource Investments
While natural resources remain at the top of China’s list of must-have targets in LatAm, the country’s SOEs and private companies should increasingly start to invest in the region’s infrastructure and manufacturing sectors, say bankers and investors at LatinFinance’s 3rd Latin America China Investors Forum in Beijing. This comes as the accumulated investment from China into LatAm reached an impressive $43.88bn at the end of 2010, says Kong Linglong, director of the foreign investment department at China’s National Development and Reform Commission. “We would be happy to provide capital to support infrastructure, ports, agricultural projects and rail,” adds Zhu Xinqiang, vice-governor at the Export-Import Bank of China. Effort to invest more in LatAm infrastructure is the next logical step for China, which wants to improve its capacity to move the natural resources it seeks to extract from a region where ports and railways still need modernizing. “The Chinese need to invest in infrastructure, including ports, railways and energy, to better exploit these natural resources,” says one banker on the sidelines of the conference. Beyond that, Chinese companies are also expected to take an increasing interest in investing in sectors that allow them to benefit from LatAm’s burgeoning consumer class. Bankers cite the examples of companies like China’s Chery Motors or air conditioning manufacturer Gree, which are already establishing plants in LatAm.“The idea for these car companies is to move their supply chain to have local sourcing of parts,” says a banker. “Import taxes in Brazil are prohibitive so if they want to make money they will have to start producing there.” Such companies typically access dollar funding from China, but will likely seeking financing in reais to offset FX mismatches once they start generating revenues in local currency.
Hacienda’s Escobar Returns to Post
Maria Catalina Escobar has rejoined Colombia’s finance ministry, as director of external market financing. Escobar left her position– which included directing the sovereign’s dollar bond issuance – in August 2009 to complete a graduate degree with the expectation to resume her role, and returned last week.