Category: Regions

Mexico-based food company Sigma Alimentos, a unit of conglomerate Alfa, is acquiring US-based processed foods company Bar-S Foods Co. for an undisclosed amount. An Alfa spokesman says that part of the deal will be financed with cash and part with a credit facility the company already has in place. He declines to offer details of the credit facility or to name the financial advisors, citing confidentiality agreements. In 2009, Bar-S reported revenue of $535m. The company operates 3 production plants and a distribution center in Oklahoma. Its product line includes franks, lunchmeats, bacon, dinner sausages and corn dogs, all sold nationwide under the Bar-S brand. The closing of this transaction is subject to regulatory approvals.

Moody’s has changed the outlook of Banorte’s C minus bank financial strength rating to stable from negative. It cites the increase in the Mexican bank’s core Tier 1 capital ratio, which reached 12.0% in Q2, up from 9.7% at year-end 2008. The rating agency also noted the consistency in asset quality indicators, as suggested by the non-performing loan ratio relative to total loans of 2.3% in June. This ratio is slightly down from 2.6% as of June 2009. “Nevertheless, we note that credit concentration levels remain high relative to similarly rated banks and could add volatility to the banks’ earnings,” Moody’s says.

Mexican states’ and municipalities’ enhanced loans performed well in the economic downturn, says a new surveillance report by Moody’s, which aims to give more transparency on monitoring these instruments. The loans, backed by pledges of transfers from the Mexican government, showed low volatility, despite a 20% contraction in participation transfers, says the report. The report covers the period between Q2 of 2008 and the end of Q1 of 2010. State and municipal debt service coverage (DSC) for these loans was an average of 5.7x during this time, which Moody’s considers a robust level. Reserve levels were also above the minimum stipulated in loan contracts. Participation transfers were only insufficient in the case of one municipal loan in July 2009. Despite reserve funds being drawn down to pay the debt, they were replenished the following month, says Sean Marion, VP at Moody’s and co-author of the report with Rodolfo Torres and Francisco Uriostegui, both associate analysts. Moody’s also rated transactions backed by other federal funds, with loans backed by these revenues performing well, as expected because of the fixed nature of the funds. These funds are not exposed to economic cycles to the same extent as participation transfers, says Marion.

Darby Overseas Investments plans to raise its first Mexico-specific fund through the certificados de capital de desarrollo (CCD) market. “We will look to continue doing what we’ve been doing in Mexico for the last 15 years,” MD Jaime Salinas tells LatinFinance. Darby has made 10 investments in Mexico since 1996, he explains, and exited 7. The shop has played in Mexico through LatAm-wide funds, the most recent of which raised $175m and is now fully invested. Salinas says the CCD aims to raise around MXP2bn and target – as it has in the past – medium size companies in a variety of industries in Mexico with equity and quasi-equity investments. Ideally, the transaction would close by the end of the year, Salinas says. A parallel fund, common among PE CCDs, is likely. The 10-year CCD will have a 5-year investment period. Bank of America Merrill Lynch is managing the transaction.