Mexico’s central bank is expected to keep the country’s benchmark interest rate at 4.5% Friday. The case for the bank’s neutral stance was strengthened earlier this week when authorities announced lower than expected inflation numbers. “Against a backdrop of moderate real activity expansion, still negative output gap, well contained inflation dynamics, and exceptionally accommodative monetary conditions for the foreseeable future in the United States given the uninspiring real business cycle conditions, the central bank is likely to remain on hold also for the foreseeable future,” Goldman Sachs says. The shop sees the bank likely holding until 2013, with a growing probability of rate cuts if domestic real economic activity decelerates.
Category: Regions
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Celfin Clarifies BTG Merger
Celfin Capital will become a part of the BTG Pactual group, says the Chilean shop. The announcement helps clarify how the merger between the two banks might proceed. The Chilean brokerage with operations in Colombia and Peru and the Brazilian investment bank would “merge and all of the business and operations of Celfin and its subsidiaries would become part of the BTG Pactual group,” it says in a regulatory filing. It also notes that Celfin would “maintain in general terms the current administration of Celfin Capital, which would have as a principal responsibility the development, management and implementation of the BTG Pactual Group in the Andean region, including Chile, Peru and Colombia.” If completed, the deal would give BTG a foothold in the three Andean economies it has been eyeing, as well as allow Celfin to gain exposure to the Brazilian market. BTG announced talks about a merger Wednesday, without offering many details.
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Isolux Unit Plans Local Issue
Cachoeira Paulista, controlled by Spain’s Isolux Corsan, is preparing a BRL200m ($125m) bond sale, it says. The 11-year bonds are to be divided into a fixed-rate tranche whose value adjusts with inflation and a tranche that pays a rate set to 7-year government NTN-B bonds. The exact amount of each and the interest rates they will pay remain to be defined. Santander is managing the sale, which has yet to be rated.
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America Movil Nears Decision on Mandates
America Movil (AMX) may mandate banks within the next two to three weeks for a potential international bond transaction to finance part of its MXP76.34bn ($6.12bn) buyback of Telmex shares, but it is still analyzing its funding options, according to a person familiar with the company’s plans. The wireless services provider is still evaluating size, tenor and currency for its potential bond offering, but can easily cover the costs of the stock purchase as it is sitting on $7.5bn in cash and recently closed a $4bn dual-tranche loan in EUR and USD. This comes after banks were heard pitching the credit on a bond trade amid expectations that it could possibly print a sub 4% coupon and smash regional records for pricing along this part of the curve. The company’s USD-denominated 2020s were trading at 3.95%-3.80% on yield basis Tuesday, or 165bp-150bp over, according to an investor. The company last came to the bond market in June 2010 with a EUR/GDP bond transaction, raising EUR1.75bn and GBP650m via Deutsche Bank, HSBC and BNP Paribas.
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ICA Faces Possible Downgrade
Moody’s put Mexican construction company Empresas ICA’s Ba3 rating under review for a possible downgrade Tuesday, citing higher-than-expected increases in debt leverage and working capital needs. “A larger than forecasted debt burden has reduced ICA’s funding capacity and has increased the financial costs of the projects,” it says. This comes after the company announced earlier this month that it would enter new concessions requiring an additional MXP8.3bn ($665m) in funding. Though debt holders on these concessions have no legal recourse to ICA, the company is likely to provide support given the concessions’ high margins, it adds. During the review period, the agency will examine the company’s ability and willingness to lower leverage over the medium term, business prospects and its capacity to improve its liquidity profile. Revenues and adjusted Ebitda respectively reached $1.3bn and $500m for the 12 months ending June 30 2011. This comes as the company announces the sale of its Panamanian road concession Corredor Sur to state-owned Empresas Nacional de Autopistas (ENA) for $420m. ENA recently priced a $395m dual tranche bond that helped refinance the $150m 6.95% amortizing 2025 that originally funded the tollroad. With that refinancing behind, it ICA could move forward with the sale that brought in a net amount of $220m for the company.
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Celfin Tie-up to Give BTG Andean Path
BTG Pactual’s proposed merger with Chilean investment bank Celfin is seen giving the Brazilian investment bank a leg-up in establishing a beachhead to expand into the Andean region. The union between the two shops will create Latin America’s largest investment bank, BTG says, and marks its first Latin American expansion outside of Brazil’s borders. The two announced the beginning of merger talks Tuesday, but gave few details about how they are expected to proceed. It is thought however that BTG will most likely buy most or all of Celfin. “It looks like an acquisition given the difference in size between the two,” says a senior official at another Santiago-based bank. Celfin lists AUM at $5.5bn, while BTG has more than $60bn under management. A value for Celfin, a private partnership, is difficult to pin down. Celfin officials have expressed a desire for Brazilian exposure as part of their bid to become a regional investment bank after already expanding into Colombia and Peru. But gaining a foothold in the region’s largest market was clearly difficult. Brazilian rival Itau tapped into Chilean wealth management through a JV with Chilean brokerage Munita, Cruzat & Claro, in which MCC still operates independently. Celfin has cross-selling agreements with Mexico’s GBM, and its Brazilian unit. BTG CEO Andre Esteves told LatinFinance earlier this year that moves into Colombia, Chile and Argentina were likely next steps, and to expect operations there as soon as this year. BTG recently filed initial registration with the CVM, the first step towards an IPO. Founded in 1988, Celfin is owned by 6 partners, including Juan Andres Camus and Jorge Errazuriz.
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Ecopetrol Sale Falls Short
Ecopetrol got COP2.40trn ($1.34bn) in demand for its equity follow-on during the order period that closed last week, falling just short of its COP2.5trn target. The state-controlled oil producer launched the deal July 27, announcing it would sell 675.7m shares at COP3,700 each. Since then, global equity markets have taken a turn for the worse, with the share price dipping below the COP3,700 level. The overhang from future Ecopetrol sales – the government aims to sell up to 9.9% of the company in pieces beginning next year – also may have hurt. Still local analysts and brokers had expected Ecopetrol to squeak by. Orders came in from 228,000 accounts, owing to heavy marketing efforts focused on Colombia retail investors. Credit Suisse, JPMorgan and Bancolombia managed the sale.
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Peru’s BCP to Hit the Road
Banco de Credit del Peru (BCP) has mandated Bank of America Merrill Lynch and Morgan Stanley to arrange fixed-income investor meetings in Europe, the US and Latin America starting next week. The size of the deal has yet to be determined though a 144A/RegS may follow if market conditions permit. Investor meetings kick off on August 31 with scheduled stops in Switzerland on Monday, in Los Angeles and London on Tuesday before wrapping up in Boston and New York on Wednesday. The bank, established in 1889 is considered Peru’s oldest and largest bank, and is rated Baa2 and BBB by Moody’s and Fitch. BCP was last in the international markets in March when raised $700m in new 2016s that were priced at 98.815 with 4.75% coupon to yield 4.792% or UST+275bp. At the time BAML and JP Morgan acted as leads. BCP had been considering a global PES deal but opted for a USD issue instead.
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Transelca Eyes Debt Sale
Colombian power transmission firm Transelca has filed for a COP180bn ($100m) domestic bond issue, according to a company official. The company will be able to choose among maturities between 1-15 years. The official declines to name the managing bank, as the transaction, rated AAA on a national scale, still remains to be approved by the board.
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Chile’s SK Buys Belgian Mining Supplier
Just a day after offloading its white goods unit, Chilean conglomerate Sigdo Koppers has agreed to purchase Belgian portfolio company Magotteaux for EUR550m ($790m). The two deals allow SK to turn its focus more completely on mining services, and is the largest-ever acquisition by a Chilean targeting assets outside of LatAm, according to Dealogic data. SK emerged the winner in a sale process started earlier this year by Swedish private equity firm IK Investment Partners for the manufacturer of crushing and grinding parts for use in the mining and cement industries. A group of international interests had been bidding for Magotteaux, including Australian miners OneSteel and Orica and private equity investors including Advent International and Doughty Hanson. BNP Paribas advised Sigdo Koppers, and is supplying an 18-month bridge loan to fund the acquisition. Morgan Stanley advised IK. SK has interests in the construction, industrial and transportation sectors, which are mostly related to the mining industry. The deal follows the strategic shedding of SK’s CTI white goods unit to Sweden’s Electrolux for $691.5m, announced Monday.