Sino-Minemet, a Chinese producer of metallurgical products, alloys and metals wants to expand its LatAm investments. It sees a growing need to invest in mines, instead of simply buying raw materials, Karl Liu, general manager tells LatinFinance. The company is in the process of signing an agreement to invest $20m in a copper mine in Brazil, a joint venture with an undisclosed Brazilian company, to which it has made a 10-year commitment. Sino-Minemet invested $10m in 2005 in a copper mine in Peru, for which it made a 15-year commitment, though this could be increased. Liu says the company seeks similar opportunities in Brazil, Chile and Argentina. “We are expanding our investment plans and are looking for the right partners so that we can invest in copper and manganese projects in Latin America,” says Liu. “Countries like Peru, Chile and Brazil have good relations with China, stable economic and political environments, growing economies and are rich in ores, so provide the best investment opportunities for us outside Asia.” Nearly 50% of the company’s copper comes from LatAm and 90% of the boric acid it buys is sourced in Chile and Peru. Liu expects the price of raw materials to increase in the long-term, and he does not expect any slowdown in Chinese demand for the processed metals which his company produces. He concludes that investing in mines as essential for the company’s growth. Sino-Minemet gets funds from private investors and bank loan, with 70% coming from the latter, in particular from China Construction Bank and China Merchant Bank.
Category: Regions
BAML Defines LatAm Fee Opportunity
LatAm is an essential part of the business for Bank of America Merrill Lynch (BAML), according to Andrea Orcel, executive chairman of global banking and markets and president of EM ex-Asia. And investment banking represents just 5% of the potential fee pool. “The emerging markets are an enormous and critical opportunity,” Orcel tells LatinFinance in an exclusive interview. “Latin America is obviously a key component of our global emerging markets strategy.” Orcel estimates a fee pool of around $70bn in LatAm and CEEMEA across banking, global markets and wealth management. About $30bn of that is anticipated from LatAm, taking into account less glamorous areas like trade and export finance, leasing, treasury services and cash management, which pay well when done in bulk. “That includes all businesses: corporate banking, sales and trading, investment banking and wealth management,” says Orcel. “According to Dealogic, the investment banking fee pool for Latin America was about $1.5bn in 2009. We had a high single digit market share of that and we believe we are on target to achieving double-digit share in the future,” he adds. Orcel says LatAm will be a significant contributor to global revenue across all products, but declines to put a number on it. “Latin American investment banking revenues have soared in the past year and are expected to be up 70% by year end, versus 2009,” says Orcel. Globally, BAML earned $3.1bn in Q2, from $29.5bn in revenue. Investment banking income was $1.3bn in the quarter, which BAML does not break out by region.
SMBC Sets Up Colombia Shop
Sumitomo Mitsui Banking Corporation (SMBC) has established a Bogota representative office to further expand its network in the Americas. “The Andes region (Colombia, Peru, Panama, Ecuador, Bolivia, and Venezuela) is expected to continue to see solid growth, following Brazil and Mexico,” says the Japanese bank. “Seizing the opportunities this economic development offers will enable us to gain more business in sectors where SMBC has a competitive edge, such as project finance,” it adds. Asian companies are increasingly participating in projects in the region, led by Japan and South Korea, says SMBC. The Colombia presence, led by Luis Fernando Perdigon, aims to offer sophisticated financial solutions for projects in oil & gas, natural resources, energy and power. SMBC already has offices in Brazil and Mexico.
Trinidad Scraps Alutrint, Rapid Rail Projects
Winston Dookeran, finance minister of Trinidad & Tobago, has announced that the government has scrapped plans to build a rapid rail and a smelter plant that was to be a joint venture between state-owned Alutrint and Venezuela’s Sural. Regarding the plant, Dookeran said during a budget presentation that “in addition to the health and environmental risk, there is also serious concern as to Alutrint’s viability and the optimal use of our gas.” The minister also says an alternative strategy will be developed for the south-west peninsula. The Chinese eximbank had provided a $400m loan to complete the smelter, which had been in planning stages since 2007. Feasibility studies and design plans for the rapid rail, meanwhile, have already cost TTD565m, Dookeran explains, adding that completing the project would cost TTD22.5bn.
Su Casita and Bancomer Quit Talks
Mexican mortgage lender Hipotecaria Su Casita and BBVA Bancomer have canceled negotiations regarding a possible sale of assets as they did not agree on valuation criteria. As a result, Su Casita, which is 40% owned by Spain’s Caja Madrid, says it will seek other alternatives and meet creditors late this month.
Kuo Shaves Yield in Tap
Mexico’s Grupo Kuo has added $50m to the 9.750% of 2017 bonds it sold 3 years ago. The maker of auto parts, plastics and canned foods reopened at 106.500 to yield 8.507%. Proceeds are marked for debt repayment. The trade was run by Credit Suisse, a bookrunner on the original $200m sale in 2007, which yielded 9.875%. The other lead, Citi, was not on the tap.
Vale to Get $1.2bn Chinese Line
Vale is getting a $1.229bn credit loan from Export-Import Bank of China and Bank of China. Proceeds will go towards the construction of 12 very large ore carriers with 400,000 dwt (Chinamax vessels) at the Rongsheng Chinese shipyard, says Vale. The credit line is for 80% of the funds needed for the project. The loan will be disbursed over the next 3 years, and the credit line has 13 years to be repaid. “This agreement is part of a broader financing package for our investment program involving official credit institutions from several countries,” says Vale. No spokesperson for the company was available for comment on loan terms.
Pemex Loan Gets Mixed Reviews
Mexico’s Pemex received a high turnout at last week’s New York bank meetings to launch a new jumbo loan, though bankers express mixed views on pricing. The Mexican oil producer seeks retail participation on a $3.25bn dual-tranche loan. The first tranche is a $1.25bn 3-year revolver, to re-finance a loan maturing this month, for which it is offering 125bp over Libor. Bookrunners are Barclays, BBVA, Credit Agricole (admin agent) and RBS. It is also wants a new money 5-year term loan for $2bn at L+150bp. BBVA (admin agent), BNP Paribas, Credit Agricole, Citi, HSBC and Inbursa are bookrunners. The revolver is to refinance a loan taken in 2007 for $1.25bn that was priced at Libor plus 20bp. Fees for participation in the revolver range from 25bp-60bp for $100m, $75m, $50m and $35m tickets. On the term loan, fees range from 45bp to 85bp for $150m, $100m, $75m and $50m commitments. One banker says the refi should see demand, as lenders look to maintain Pemex exposure. A syndicate banker based in Mexico adds that he expects local participation to be high, since it is seen as government risk. A Mexico-based banker looking at the trade says pricing is in line with the market, as he considers it a top corporate credit. However, a New York based potential retail participant disagrees, saying that with Pemex’s oil reserves declining, refineries in need of upgrades and increasing violence in Mexico, it looks tight. Another retail banker says he will not be participating in the transaction as there is already ample availability of Pemex. Current cost of funding for banks is another concern among potential participants, with one saying the spread on the 5-year is what current costs of funding are for 3 years, which make it unattractive for retail. He adds that the spread would have to be double to make it attractive to retail.
Moody’s Positive on Colombia
Moody’s has upped the outlook on Colombia’s Ba1 rating to positive from stable. It says the main drivers for the brighter view are improved prospects for structural fiscal consolidation, favorable medium-term prospects in oil production and the ability to navigate the global crisis and manage the negative impact of difficult trade relations with Venezuela without sustained damage. Francisco Chaves, a strategist at Colombian research shop Corredores Asociados says this is “the first step leading to an upgrade, which could take between 6-8 months.” In July, S&P, which has a BB minus rating for the sovereign, also lifted Colombia’s outlook to positive.
Pemex Seeks Retail for $3.25bn Loan
Mexico’s Pemex will be holding New York meetings today with banks, looking for retail participation in a $3.25bn dual tranche syndicated loan, following on from meetings in Mexico Tuesday. The Mexican oil producer is looking for a $1.25bn 3-year revolver, to re-finance a loan maturing this month, for which it is offering a spread of 125bp over Libor. Bookrunners on the deal are Barclays, BBVA, Credit Agricole and RBS, with Credit Agricole as the administrative agent. It is also looking for a new money 5-year term loan for $2bn at L+150bp, for which BBVA, BNP Paribas, Credit Agricole, Citi, HSBC and Inbursa are bookrunners, with BBVA as admin agent. The revolver is to refinance a loan taken in 2007 for $1.25bn that was priced at Libor plus 20bp. Initial comments from some retail banks were that pricing was too tight, given current cost of funding for banks. One banker says the spreads should be double what is being offered in order to make pricing attractive for retail. “The spread on the 5-year is what current costs of funding are for 3 years, so it does not seem attractive from a retail point of view,” adds one.