British American Tobacco (BAT) says it is interested in Colombian cigarette company Protabaco, following Philip Morris’ decision to walk away from a $452m deal. Philip Morris announced Wednesday it would abandon acquisition plans in the face of objections from Colombia’s Superintendencia Financiera. The market regulator’s hackles were raised by the prospect of the 78% market share the combined Philip Morris/Protobaco would command. Colombian equity analysts say BAT would likely face the same objections from the regulator should it try to step into the breach. However, a BAT spokesperson says its market share in Colombia is significantly less than Philip Morris’ and that BAT should not encounter the same problems. BAT had previously expressed interest in the target.
Category: Regions
Interbolsa Entering Mortgages, Car Loans
Colombian financial conglomerate Interbolsa is launching two Bogota-based subsidiaries this year, company president Rodrigo Jaramillo tells LatinFinance. One will be focused on residential mortgage loans while the other focuses on car loans. Jaramillo says Interbolsa is investing $20m in cash on hand in the mortgage loan company, and that Deutsche will take a 15% stake in the subsidiary after one year. “Our objective is to take on a 7% market share in a year,” Jaramillo says. The largest player in the residential mortgage market is Bancolombia, Jaramillo says, with about half of the market. Revenues in the Colombian residential mortgage market grow at about 7%-8% a year, he adds. Meanwhile, Jaramillo says the car loan subsidiary is being created in partnership with local car retailers and will require a smaller investment than the mortgage company. In 2010, about 250,000 cars were sold in Colombia, of which 80% were financed, he says. In fact, local research firm Econometria says that 2010 car sales reached a record high. “We expect to gain 15% market share in the car loan sector in a year,” Jaramillo says.
Credito Real Raising Local Debt
Mexican real estate company Credito Real, is expected to issue up to MXP250m in bonds, which will be used for working capital, according to a regulatory filing. The bonds are expected to be issued on 1 February, have been rated A minus on a national scale by S&P and will pay a spread over TIIE. IXE is the bookrunner on the deal.
Peru Rate Seen on Hold
Peru’s central bank is expected to keep its rate at 3.00% today. “The central bank is likely to take comfort in the near term from benign inflation data and slowing economic growth to keep rates on hold,” says Morgan Stanley. Barclays agrees and adds that a hike could take place in March, depending on inflationary conditions. Annual inflation in December came in at 2.08%, at the midpoint of the target range, according to the central bank.
CFE to Retap Local Bonds
CFE’s dual-tranche deal expected January 11 will be for up to MXP9bn, according to a banker on it. It is a retap of its 4-year floating and 10-year fixed rate bonds, according to a regulatory filing. Pricing has not yet been determined, adds the banker. BBVA Bancomer, Banamex and ING are joint leads on the sale for the federal electricity company. The bonds are rated AAA on a national scale. Proceeds will go toward working capital and to refinance existing debt. The original deal priced December 2. The 10-year tranche was for MXP9.0bn, after total orders reached MXP14.6bn. The bonds priced to yield 7.96%, or Mbonos plus 120bp, in line with guidance, according to bankers on that sale. The 4-year was for MXP5.0bn, on MXP8.4bn in demand. That tranche priced at 26bp over TIIE, tight to guidance of 30bp.
Bancolombia Places Non-Subordinated Bond
Bancolombia saw strong demand for a $520m 5-year bond, its first-ever non-subordinated issuance in dollars. Colombia’s largest bank, active in the capital markets in recent months, got about $1.6bn in total demand, according to a banker on the sale. The Baa3/BBB minus 2016 priced at 99.156 with a 4.250% coupon to yield 4.440%, or UST plus 230bp, the tight end of 230bp-240bp guidance. Whispers at the announcement Wednesday morning were at UST plus mid 200s, according to investors. Comparing to the issuer’s curve is tricky, investors say, as Bancolombia’s other dollar bonds are subordinated. Traders spot the most liquid, a 2020, trading to yield around UST plus 240bp. One New York EM investor considers the pricing fair, noting the new bond was trading up 0.25-0.50 Wednesday afternoon. Proceeds are marked for general corporate purposes. JPMorgan managed the sale. The bank sold a $315m equivalent local bond last month, which followed a $620m 2020 tier 2 bond in July, its first international sale in 3 years.
Baja Mining Seeks Project Financing
Minera y Metalurgica del Boleo, the Mexican subsidiary of Baja Mining Corp. is looking for $823m in project financing. The funds will go toward the construction of the Boleo copper, cobalt and zinc mining project, which will be constructed in Baja, Mexico, according to Deutsche, which has been mandated for the agency roles. The financing will be divided into 5 tranches of senior debt, with funding coming from commercial banks and export credit agencies, and a subordinated debt tranche, says the bank. Deutsche will work with the US Eximbank to oversee the financing during construction and operation, it adds.
BdB Considers Euro Debut
Banco do Brasil (BdB) is meeting the European buyside next week, with an eye on its first euro-denominated issuance. The bank, considered one of the highest-quality LatAm candidates for euro issuance since a pickup in the class last year, plans to visit London, Paris, the Netherlands, Germany and Switzerland next week Monday through midweek, according to investors. The bank has not divulged details of any deal, announcing only the meetings and that a transaction could follow. BdB, Banco Votorantim, Deutsche Bank and BNP are managing the process. The bank’s last sale was a $600m 2020 tier 2 bond in September, through Bank of America Merrill Lynch, HSBC and Votorantim. European investors hungry for diversity have welcomed high-quality Brazilians in recent months, with Telemar (BBB/Baa2) raising EUR750m in 2017s at a 5.330% yield in December, after BNDES (BBB minus/Baa2) got an identical size and maturity at 4.243% in September.
Eurasia Sees Risk in Mex, Peru, Arg
Violence in Mexico and underperformance in Argentina and Peru are among the top 10 risks for investors this year, according to political risk consultancy Eurasia. It does not expect state failure in Mexico, and says fighting will likely be contained in the northern and western regions. Eurasia does predict an escalation. “There will be a rising risk of more dramatic violence, including assassination attempts on government officials or prominent local, American, or other foreign business figures,” says the group. In Argentina, Eurasia says markets appear overly optimistic that policy will improve, either by the removal of Kirchner or fresh policy direction if she wins. “Kirchner is likely to win and policy is unlikely to change, leading to higher inflation and a further continuation of populist policy,” says Eurasia. It adds that investors in Peru underestimate the potential for populist candidate Ollanta Humala to make a serious run at the presidency. “He’s an underdog to be sure, but he has a sporting chance. And even if a more market-friendly candidate wins, we’ll see more resource nationalism in post-election policy,” says the group. Capital controls to stem currency appreciation are another threat, and Eurasia identifies Colombia and Peru as among 4 countries most likely to enact them this year. Eurasia’s head of research David Gordon says he is not concerned about political risk in Brazil, although he notes creeping resource nationalism. “On balance I think the Brazilians look very good indeed,” he adds. The number one global risk is what Eurasia calls “the G-Zero,” in which the world’s major powers set aside aspirations for global leadership—alone, coordinated, or otherwise—and look primarily inward for their policy priorities. “Key institutions that provide global governance become arenas not for collaboration but for confrontation. Global economic growth and efficiency is reduced as a result,” says Eurasia.
Mexican Restaurateur Signs Loans
Mexico’s Alsea has signed bank loans totaling MXP600m, it says, with nearly all of the proceeds going to repay bank debt. The restaurant operator signed separate MXP300m loans with Santander and HSBC, each for 5-years, at an interest rate of TIIE plus 150bp. “This operation allows the company to improve its maturity profile, extending its average duration to 2.6 years, and also resulting in financing at lower rates,” Alsea says. It adds that the funding should give Alsea more freedom to continue with expansion plans.