Fertinal was expected to have priced yesterday, according to a banker close to the deal, though other people tracking it say it was likely pulled. The $200m 2015 issue was rumored to have had trouble making book, and had originally been expected to launch by Tuesday. “It needs a stronger covenant package and guarantees on the first couple of coupons,” says an investor who passed. “It’s never been clear what [Ricardo] Salinas Pliego’s role was,” he adds. Salinas is said to own around 27% of Fertinal’s equity through holding companies, and the involvement is understood to have unnerved other potential participants. Another says that the pitch book was unclear, and that there were unexplained issues with the quality of the collateral. “Two months ago that deal would have sold overnight at that rate,” says a banker away from the deal. Proceeds of the B2 rated issue were to be used to repay a $180m bridge and partially finance capex and support working capital. The bridge is being used to reacquire assets from former creditors and satisfy other obligations associated with its bankruptcy, according to Moody’s. The fertilizer maker has a narrow product line, single site production capabilities and a limited operating history since restarting operations in 2007 after filing for bankruptcy, the agency says, noting a positive view on the agriculture sector and expectations of Fertinal’s improvement if it sticks to the business plan. Bankers at lead UBS did not return calls seeking comment.
Category: Regions
Fertinal Slips Off Radar
Investors were left wondering yesterday after Mexico’s Fertinal failed to price a $200m 2015 bond that was heard carrying a 12 handle. The deal flies against the prevailing trend in which LatAm issuers of all stripes are finding very strong demand for their bond issues. Macquarie is now rumored to be working on the deal, though there is no word on when it may price. Investors expressed skepticism toward the Mexican fertilizer company. “It’s a very tough credit,” said one West Coast investor. “Frankly I’m surprised they tried,” he adds. Other investors say Fertinal’s lack of ability to provide significant data, and participation of Ricardo Salinas, who is said to own around 27% of Fertinal’s equity through holding companies, could be deterring potential participants. Bankers at lead UBS decline to comment. Proceeds of the B2 rated issue were to be used to repay a $180m bridge and partially finance capex and support working capital. The bridge is being used to reacquire assets from former creditors and satisfy other obligations associated with its bankruptcy, according to Moody’s. The fertilizer maker has a narrow product line, single site production capabilities and a limited operating history since restarting operations in 2007 after filing for bankruptcy, the agency says, noting a positive view on the agriculture sector and expectations of Fertinal’s improvement if it sticks to the business plan.
Elementia Seeks Loan Commitments
Elementia, the Mexican building supply conglomerate, is looking for commitments by October 15 on a $450m 5-year term loan. Fees for lead manager commitments of $50m are 75bp, while managers committing $25m get 50bp. The margin is based on a leverage grid, which is 350bp for 2x leverage and above and 275bp for a leverage under 2x. The loan is amortizing starting with 10% from the second year, rising by 10% each year. Citi, HSBC, Inbursa and Santander are bookrunners on the loan, which is expected to be 70% in dollars and 30% in Mexican pesos. Retail bankers away from the loan say they consider it to be well-priced for a strong company.
Fertinal Expected With 12-Handle
Mexico’s Grupo Fertinal is likely to price a 2015 bond of about $200m in size with a 12-handle today, according to investors not expecting to participate. They expect it to price near par. UBS is managing the sale, and is rumored to be having a difficult time filling the book, with locals shunning the trade. Some investors allege that the involvement of Ricardo Salinas, who is said to own around 27% of the company through holding companies, could be deterring potential participants. Bankers at UBS decline to comment. Proceeds of the B2 rated issue will be used to repay a $180m bridge and partially finance capex and support working capital. The bridge is being used to reacquire assets from former creditors and satisfy other obligations associated with its bankruptcy, according to Moody’s. The fertilizer maker has a narrow product line, single site production capabilities and a limited operating history since restarting operations in 2007 after filing for bankruptcy, the agency says, noting a positive view on the agriculture sector and expectations of Fertinal’s improvement if it sticks to its business plan.
ICA to Raise Funds for Aqueducts
Mexican construction company ICA Infraestructura is looking at two aqueduct projects likely to begin construction next year. The 2 projects, Falcon and Zapotillo, had been planned for this year. Falcon, the larger of the pair, is expected to cost more than MXP1bn. ICA Infraestructura director of finance Juan Antonio Garcia-Gayou Facha tells LatinFinance that the delay is due to a “lack of hands” at government agencies responsible for the projects. Despite President Calderon’s pledge to spend $234 billion over 5 years on infrastructure projects, development agencies have been insufficiently staffed to handle the flood of new proposed projects. Garcia-Gayou also cites a lack of sufficient analysis by government agencies, which have oftentimes seen bids by concessionaires come in significantly below government expectations. Garcia-Gayou adds that his company is open to considering a number of financing options for the projects, but is still waiting on final feasibility before going to investors. ICA is also considering bidding on several toll roads, including the Pacifica Sur project, which Garcia-Gayou says would generate significant synergies with its existing roads in the south.
Mexico Needs More Guarantees, Says Market
More work needs to be done so guarantees from development banks can be used for public sector projects in Mexico, say market participants. “As national infrastructure projects could get more than half of the necessary investment from private funds, it is essential that action is taken to develop guarantees for the flow of payments,” says Vladimir Ramirez, deputy director of projects for Hacienda’s investment division. He adds that using these structures will decrease the amount of capital and resources needed for projects that can be difficult to finance. Ulises Garcia Medina, director at Protego Assesores, adds that it is also necessary to clearly define the risks of a project and who is responsible, to ensure they are not more costly than they should be. “It is essential to carry out proper analysis on what a project needs so that it gives confidence to those who could potentially finance a project,” he says. Participants agree that there are not enough guarantees from development banks for domestic PPPs, which Ramirez says is largely down to lack of planning. “There are not solid plans laid out for medium and long-term projects,” he says. “There need to be more studies done before a project is started to see where viable and alternative sources of funding can come from,” adds Ramirez. State governments are also guilty of only looking at projects that can be completed in a short enough timeframe to be completed by each 6-year administration. Ramirez adds that this deters investors from participating in projects and so curbs investment. States also lack information about the benefits of using guarantees, and more needs to be done to promote the fact that they are available, says Sergio Hinojosa, principal advisor for PIAPPEM, the IDB’s program to support PPPs in Mexican States. He adds that borrowers can also be put off from using guarantees as they add 25bp-250bp to the cost of a project, and they can also take away flexibility in the way a transaction is structur
Edomex ABS Clone Seen Unlikely
The State of Mexico’s (Edomex) recent securitization of funds generated by the sale of residential property titles is likely to remain the only one of its kind for now. The transaction was the first of its kind and had raised hopes such a deal could be replicated in other parts of the country. But Osvaldo Santin Quiroz, director general of the Instituto de Seguridad Social del Estado de Mexico y Municipios, suggests that this is unlikely. “That was the end-result of a 4-year process that entailed several legal and organizational changes,” Quiroz tells LatinFinance. Any other state government wanting to follow Edomex’s lead would likely have to make similar changes to laws governing the management of title insurance income as well as organizational changes to their bureaucracies in order to allow such a structure to be managed. Edomex in August issued the innovative MXP4.065bn 20-year deal securitizing future flows of income from residential property title fees, which it had been working on since the middle of 2009. The 2030 Edomex deal has a 14-year average life, pays fixed rate and is divided into 2 tranches. An MXP2.765bn tranche features a 100% guarantee from OPIC and was priced at 132bp over Mbonos, paying a 7.86% coupon. It is the first time OPIC has fully guaranteed a transaction in the local market outside the US, say bankers at the leads. The MXP1.3bn tranche carries a 30% first loss guarantee from CAF, it is rated AA on a national scale and was priced at Mbonos plus 359bp, with a coupon of 10.13%. Banamex and HSBC managed the sale, which was structured by MBIA. Quiroz was speaking on the sidelines of the LatinFinance Infrastructure and Sub-Sovereign Finance in Mexico Summit held last week in Merida.
IDEAL Rides Mexico Highway Projects
Mexican infrastructure player IDEAL says it is working on 4 highway packages for the coming months. Miguel Martinez, director of project evaluation and financial structuring for IDEAL, says his infrastructure fund is working on a combination of greenfield and existing highway projects: Farac Northeast, the second phase of Farac Pacifico North, Salamanca-Leon, and Michocan. Of the 4, only Salamanca-Leon is a pure greenfield play, he says. Martinez declines to comment on the size of the projects, saying that IDEAL is still waiting for the final engineers’ reports. The fund will likely partner with commercial and, potentially, development banks, in order to raise money for the projects’ construction phases. Other investors, including Afores, may be brought in for later, less risky phases of the concession. “The important thing is finding the tools to guarantee investors an adequate return on investment,” Martinez says. Regarding cost of funds, Martinez says IDEAL has seen spreads in the bond market inch up, though this has somewhat been offset by a decrease in base rates. He was speaking on the sidelines of the LatinFinance Infrastructure and Sub-Sovereign Finance in Mexico Summit held last week in Merida.
Mexico Gets Highways Back on Agenda
Mexico’s transport and communications ministry (SCT) says it is back on track with plans to build motorways in Mexico, following cancellations and delays because of the financial crisis. “We did have difficulty obtaining the funds necessary for the scale of the projects, as planned projects needed MXP9bn of investment,” Armando de Jesus Athie Rubio, director of project planning for the SCT tells LatinFinance. He adds that Banobras and Fonadin have been instrumental in getting projects back on course, and have given up to 70% of the credit needed in some cases. There are 4 main projects being worked on. Contracts are out to tender for a network of motorways in the northeast of Mexico, proposals for the expansion of highway crossing the border are expected in December, and the same timeframe is expected for the construction of a network of motorways in the Southern Pacific region. Meanwhile, proposals on a network of motorways in the state of Michoacan, including construction of 2 new motorways and the expansion of an existing one, are expected by next month, with work to begin May 2011. “These are very big projects, so there could be some possible changes to dates,” says Athie. “There are 2 other big projects in the pipeline, but contracts will not be out to tender until 2011,” he adds.
Mexico, Colombia Leave Rate Untouched
As expected, Mexico’s central bank has left its monetary policy rate unchanged at 4.5%. “In Mexico, production and manufacturing exports have kept good growth momentum, although it could decrease as economic activity in the US moderates,” the central bank says.” Barclays expects the rate to stay at 4.5% until Q1 2011, tightening by 25bp in Q2 2011. Separately, Colombia’s central bank also kept the monetary policy rate on hold, at 3.0%, as expected. The bank cites stable inflation levels and GDP growth in line with expectations. Credit Suisse, says real GDP is up 4.5% year-over-year in Q2, roughly in line with its projection. Celfin says that if inflation remains near historical lows, it would expect the bank to keep its policy rate unchanged at 3.0% for the rest of 2010.