Canada-based miner Gammon Gold has made a new offer to acquire US-based Capital Gold. Both companies operate in Mexico. The deal is valued at $288m or $4.57 per CapGold share. Each common share of CapGold would be exchanged for 0.5209 common shares of Gammon Gold and a cash payment of $0.79 per share. The acquisition has the unanimous support of both companies’ boards, each company says. However, it looks like the offer may run into trouble. US-based law firm Brodsky & Smith has announced it is investigating potential claims against CapGold’s board as it believes the transaction to be unfair given that CapGold’s stock traded at $4.83 September 30, meaning that the current Gammon offer undervalues the company. Also, the offer comes soon after Canada-based miner Timmins Gold, which also operates in Mexico, offered to buy CapGold for $275m. The offer was rejected by CapGold’s board. Gammon’s financial advisors are Dundee Securities and UBS, while CapGold’s is Comark Securities. A previous offer Gammon made for CapGold fell through after Gammon’s share price slid following the deal. The offer, made in March 2009, was valued at $150.5m based on Gammon’s offer of $0.76 per CapGold share. As part of the deal each CapGold share would be exchanged for 0.1028 Gammon shares. On that deal BMO was advising Gammon and Jennings Capital was advising CapGold. On October 1, Gammon’s shares closed at $6.88, down 1.9% while CapGold’s closed at $4.82, down 0.2%.
Category: Regions
CAF Deploys Loans to Panama, Argentina, Brazil
Multilateral bank CAF says it has approved loans for Brazilian electric company Eletrobras, Argentina’s railway system and Panama’s capital. Eletrobras will obtain a total of $500m in the form of an A/B loan. Of that amount, CAF will provide $125m, while the remaining $375m will be a syndicated loan from BBVA, Santander and HSBC. Argentina, meanwhile will get $326m, all from CAF, to improve railroad connections between the northern part of the country and the ports. Lastly, Panama’s capital city will get $120m from CAF to improve the sewage system. Terms for the loans are not disclosed.
Upcoming Ecopetrol Bonds Get AAA
Colombian oil giant Ecopetrol plans to issue up to COP1trn ($555m) in local bonds. A company spokesman says that terms have not been set yet and that banks have not been selected. However, Fitch has given the notes a local AAA rating. Ecopetrol has indicated it intends to invest about $80bn by 2020, including $6.9bn in 2010 alone. Fitch says the company has a strong liquidity position and that as of June, it had $3.4bn in cash on hand.
Banorte And Ixe Rumored in Pact
Mexico’s Banorte and Ixe are rumored by local press to be in talks about a merger. In a statement to bolsa, Banorte says it is analyzing “different strategic alternatives to continue consolidating its leadership position as one of the most important institutions in the Mexican financial system.” In a separate statement, Ixe says it is analyzing different strategic alternatives as part of a constant effort to maximize the value of the institution. It adds that it wants to boost its competitive capacity in the local market.
Sinopec Buys Into Brazil Via Repsol
Spain’s Repsol has sold a 40% stake in its Brazil unit to Chinese oil firm Sinopec for $7.1bn, a high price in line with recent comparables. Repsol had been planning to float the stake, but opted for a strategic sale instead. Adam Waterous, head of global investment banking at Sinopec advisor Scotia Waterous, says the deal provides significant benefit over an IPO, including access to Sinopec’s technical and crude marketing expertise, as well ties to an exploration major. “With an IPO, you’re really only getting the cash,” Waterous tells LatinFinance. The $7.1bn price is seen in line with what Repsol would have achieved in the stock market, say analysts. Repsol’s valuation represents around a 66% premium to the value analysts had assigned earlier in the year. The Repsol Brazil assets have not yet begun producing, and may not for another 2-3 years. Waterous rejects suggestions that the premium is too high, pointing out that the buyer gets minority stakes in Petrobras-managed platforms. A banker away from the deal agrees that the price is not surprising given recent comparables, such as Sinochem’s purchase of a 40% stake in Peregrino from Norway’s StatOil for $3.07bn. Even non-performing assets are achieving healthy multiples thanks to scarcity of Brazil resources, while similar plays in Argentine incur political risk. Additional capex funding will also likely be needed in the future, the banker says. Sinopec is controlled by the Chinese government, which has been aggressive in its pursuit of LatAm oil this year. Sinopec was advised by Scotia Waterous and Vinson Elkins, while Respol was advised by Latham Watkins. The transaction should make Repsol’s plans for a Brazil asset spinoff – expected at $4bn equivalent – unnecessary. It would have been the largest this year in Brazil by a non-government controlled entity. BAML, Credit Suisse, Itau and Santander won the mandate to lead the deal, for which Repsol filed a preliminary prospectus in August. Sinopec is also bidding
Banorte Lends To Oaxaca and Naucalpan
The Municipality of Naucalpan will receive an enhanced loan for MXN486m from Banorte. The loan has a maturity of 20 years and will pay a spread of TIIE plus 175bp. The loan will be used to refinance an existing loan at a lower cost. Moody’s has assigned a debt rating of Aa1 on a national scale. Banorte will also give the State of Oaxaca a MXP250m 10 year enhanced loan, to which Moody’s has assigned a Aa2 rating on a national scale. The loan will pay a spread over TIIE. The loans are payable through trusts, to which the municipalities have pledged the flows of a portion of their federal participation revenues. The ratings actions are based on the underlying creditworthiness of the states and the strong trust structures, as well as estimated cashflows.
Jamaica Snags IDB Loan
The IDB says it is providing the Jamaican government’s Education Transformation Process with a $60m loan program and expects to provide an additional $30m in 2012. Proceeds will be used to improve education on the island. Terms were not disclosed.
BBVA Continental Pays For Step Up
BBVA Continental boosted its Tier 1 capital with a $200m 2040 NC10 step-up issue. The Peruvian unit of the Spanish global bank drew about $1bn in orders, according to bankers on it. The deal landed at par with a 7.375% coupon to yield the tight end of 7.500% area guidance. After the 10-year no-call period, the bond pays a floating rate of Libor plus 680.2bp. The bond was heard up 2 points in the aftermarket Thursday, following talk in the market that it was coming cheap. Pricing falls between the roughly 7.0% yield of BCP’s hybrid step-up and the 7.5% level of Interbank’s hybrid, according to a New York-based EM investor looking at the deal, adding that a price comparison is tricky, as the secondary is not very liquid. Continental is expected to use proceeds for general corporate purposes and to strengthen its balance sheet. The bond makes use of a loan participation note structure to avoid a withholding tax. BBVA and Credit Suisse managed the sale, rated BB/BBB minus.
Interbank Nets $400m
Peru’s interbank has priced $400m in new 2020 bonds, as investors showed continued enthusiasm for ex-Brazil banks by placing about $2bn in orders. The nation’s third largest bank priced at 99.820 with a 5.750% coupon to yield 5.774%, or UST plus 325bp, the tight end of 337.5bp area guidance. “It offers a fair concession to BCP,” says a participating North American EM debt portfolio manager, who spots the pickup at about 50bp to the much larger Banco de Credito del Peru. The bond was trading up about 0.5 points Thursday afternoon, according to a trader. BCP had raised $800m in 2020s this month. Bank of America Merrill Lynch and JPMorgan managed the sale, rated Baa3/BB+/BBB minus. It was Interbank’s first bond since a $250m in new 2070 hybrid NC10 bond in April.
Afores Warm to Infrastructure, Despite Risk
Infrastructure may present an attractive opportunity for conservative investors like Afores, say Mexican market participants. “Risks are unavoidable in any business,” says Juan Antonio García-Gayou Facha, CFO at ICA Infraestructura. “The key is knowing how to mitigate them.” Indeed, risk mitigation is a chief concern among both investors and concessionaires. One potential solution championed by Miguel Martinez, director of project evaluation and financial structuring at IDEAL, is for infrastructure projects to be funded first by development, commercial and multilateral banks during the construction phase. Once project construction is complete, and potential stumbling blocks – such as environmental, social, and usage rights – have been surmounted, pension funds can participate in the operating phase. “The majority of our investors, about 66%, are pension funds,” says Nick O’Neil, COO of Macquarie Infrastructure’s Mexico fund. “Our clients have long-term liabilities” which dovetails nicely with the long-term, and often highly predictable, nature of infrastructure revenues, he adds. Sergio Méndez Centeno, Investment Director for Afore XXI, agrees. “We believe these are very important investments for us.” For Afores, infrastructure still represents a relatively new asset class. While participation in the sector has increased in recent years, investment levels remain far from ideal, according to Martinez. O’Neil says Macquarie mitigates risk for its investors by virtue of its structure as a fund, which aggregates multiple projects, reducing the likelihood of major losses. Macquarie has raised a MXP5bn fund to invest in the country’s upcoming projects, and opened a local office last year. However, the legal framework for project agreements, including matters such as minimum return guarantees, remain a area of particular concern for investors. “All players have to feel comfortable,” says Méndez, particularly when it comes to ensuring that capital costs and investment retur