The IFC has signed a facility with Bancolombia that is says will execute up to $400m of risk-management transactions. “This IFC facility, the first of its kind to a Colombian bank, will strengthen the bank’s ability to provide risk-management instruments to local companies,” says the multilateral. It adds that the deal will increase the capacity of Colombian companies to access risk-hedging products such as cross currency and interest rate swaps. “This will allow these companies to better manage their exposure to foreign exchange and interest rate risk, which could result in lower-income volatility and a more stable cash flow,” says the IFC. The IFC will act as a counterparty on cross currency and interest rate swaps, allowing Bancolombia to cover clients in manufacturing, construction, and tourism.
Category: Regions
Colombia Reported Growing Bond Issuance
Colombia is raising borrowing on local market and international markets by approximately $2bn to replace revenue from postponed privatizations, according to wires, which cite finance minister Oscar Ivan Zuluaga. It will borrow $500m in international bonds, $500m more from multilaterals and issue COP2trn ($1.06bn) to cover COP4.5trn that had been expected from privatizations, including Isagen and regional utilities, say the reports. Separately, the IDB has approved a $200m loan for Colombia to help finance a program to improve controls over the finances of territorial entities. The loan has a repayment period of 20 years and 5 years of grace, with a rate based on Libor.
Peru Buyside Bets on Infrastructure, RE
Real estate and infrastructure stand out as attractive sectors for Peru’s local investors, according to panelists at last week’s LatinFinance Andean Investment Forum in Lima. They also want regulators to prioritize boosting secondary market liquidity. There is a large infrastructure gap in Peru, says Alejandro Perez-Reyes, CIO of Prima AFP. He adds that pension funds have cash to allocate, but the main hurdle is time spent building tailored investment vehicles. “It takes a long time for the process before [infrastructure funds] can raise money,” says Perez-Reyes. He sees health care as a growth area in Peru over the next few years, though the market lacks entities to invest in. Javier Freyre, CEO of InVita Seguros De Vida y pensiones, prefers infrastructure projects linked to inflation. He also highlights real estate, including direct investment in housing projects, as a strong growth area for the next few years. Both sectors are great for buy-and-hold investors, he says. However, more secondary market liquidity is needed to develop equities and local bonds. “We are willing to take a lot of risk in local currency, but there are some artificial barriers to entry by having a less liquid market,” says Danilo Simonelli, head of EM fixed-income at Ontario Teachers Pension Plan. He adds that Peru is a “success story” with strong growth in several sectors. Developing a repo market would be one useful tool, Simonelli notes. Jose Martinez, CIO at Rimac Seguros, agrees that allowing short sales and broadening availability of derivatives for institutional investors should help. Perez-Reyes says he would like to see AFPs be able to lend shares.
Darby Sells Termobarranquilla Stake
US-based private equity shop Darby Overseas says it has sold its 28.7% stake in Colombian power plant Termobarranquilla to Golden Gate Energy Investments, which is owned by a Colombian consortium. Terms were not disclosed. Darby, through its DLAMF I fund, acquired FirstEnergy Corp’s direct and indirect interests in Termobarranquilla in January 2004. The Termobarranquilla sale represents the tenth exit for DLAMF I, which now has 2 portfolio companies remaining. Darby has over $572bn in AUM.
Peruvian Taps Bolivia DCM
Peruvian conglomerate Grupo Gloria has ventured into Bolivia’s capital markets to raise $11.5m equivalent via a double A rated local issue. “In Bolivia there is a small but active pension fund market, and we were able to get attractive rates, says CFO Francis Pilkington. He adds that the issue could have been up to 50% larger. Gloria, which has dairy, sugar, ethanol and paper operations, placed BOB80.3m ($11.5m)in 4 tranches of between 4-7 years at an average yield of 2.66 %, says Pilkington. The deal was through Gloria’s Pil Andina food products unit. Proceeds will fund growth projects. BISA Bolsa managed the sale.
Israel Seeks Cash For Peru Power
Inkia Energy, a unit of Israel Corporation, hopes to complete in coming weeks the financial architecture for the 400MW Cerro del Aguila hydroelectric plant in Peru’s southern highlands. Javier Garcia-Burgos, CEO in Peru, said the company is concluding financial analysis and should have definition in August on options to finance the $750m project, by far the largest undertaken by Inkia in Peru. “This project is too big for local banks,” Garcia-Burgos tells LatinFinance. “We are looking at international banks, development banks and eximbanks and hope to have definition in the coming weeks,” he adds. Inkia currently operates a thermal generating plant with 3 turbines in Chilca that produces 570MW. It is working on a combined cycle plant there that will add another 280MW in Q3 2012, putting the company among the top energy producers in Peru, according to the government. Inkia is looking at 2 additional projects in Peru, but Garcia-Burgos says it is too early to name them. Inkia is also active in the Bolivian, Dominican, Jamaican and Salvadoran markets, producing a combined 3,000MW. It operates a hydroelectric plant in Bolivia and thermal electric plants in the other markets. “We have focused primarily on Peru, where there have been opportunities, but we are actively looking to expand in other markets in the region,” Garcia-Burgos says. He was speaking on the sidelines of the 4th Andean Investment Forum in Lima last week. Tel Aviv-listed Israel holds 100% of Inkia, which has a portfolio of hydro, natural gas and other power plants located in LatAm. Approximately 64% of capacity is in Peru. In 2007, Israel acquired the LatAm energy portfolio of Globeleq for $543m.
World Bank Lends Record Amount to LatAm
The World Bank Group has committed $17.9bn to LatAm and the Caribbean in fiscal year 2010, an amount it describes as a record high. In FY 2009 it committed $17.1bn. The bank expects the region to post 4.5% growth in 2010, with Brazil leading the recovery with a projected 6.5% expansion on account of strong commodity demand. Other South American economies such as Peru, Argentina and Uruguay are also expected to reach or exceed 4% expansion. Mexico’s growth is projected to rebound to 4.3%, marking the fastest pace in almost a decade, while Central American economies will lag the recovery on weak worker remittances from the US. The Bank projects 2.7% growth for in 2010. Excluding Haiti, expansion in the Caribbean will accelerate modestly to 3.2% in 2010, from 2.0% in 2009, it adds.
Fitch Revises Global GDP Forecasts
Fitch has revised its forecast for global GDP growth in 2010 to 3.1% from 2.8%, mainly reflecting stronger first quarter growth in BRIC economies and Japan. The economic recovery is occurring at multiple speeds in LatAm, the agency says. The global economic rebound, higher commodity prices and supportive domestic economic policies have benefited the region’s macro performance. Fitch forecasts LatAm real GDP growth could reach 4.6% in 2010 after a contraction of 2.5% in 2009.
Cofide Readies Bond After Loan
Peruvian development bank Cofide is planning to place a new dollar bond as soon as the third quarter, CFO Carlos Linares tells LatinFinance. An RFP should be out for banks in the next 4-6 weeks, he explains, estimating a $200m-$300m deal at a 10-year maturity. Cofide, rated BBB minus by Fitch and S&P, is mainly raising funds for infrastructure lending. Cofide also expects to restart local issuance in PES under a $200m program in the second half of the year, with perhaps 5-10 year maturities. Global and Japanese market PES issues are also under consideration, he says. “We must start out with a dollar benchmark, to open up other markets, Linares says. Meanwhile, Cofide has closed a $135m 3-year loan priced at 125bp over Libor, less than the $185m it had originally sought. There are apparently some stragglers that could lift the total to $175m, but the deal was heard constrained by rising European cost of funds, and a 5-year was scrapped, says a banker close to the deal. Standard Chartered was bookrunner. Mizuho, Bank of Tokyo Mitsubishi and Sumitomo are heard among the participants.
Colombia and Peru Eye Bolsa Tie-up
Peru’s government remains optimistic about the first steps of regional exchange integration. “We will likely first see the integration of Peru and Colombia, as these are the most similar models,” Mercedes Araoz, Peru’s finance minister, says, speaking at the LatinFinance Andean Investment Forum in Lima Thursday. She explains regulators in both countries have been discussing integration, and she is confident it will proceed. Araoz does not indicate a timeframe, though the government has said its plan was to have cross-listing begin in November. It is also a goal to involve Chile, she says, though this process is less far advanced. In terms of immediately helping Peru’s liquidity, it will depend on whether Colombian stocks would still count as “foreign” under the investment regimes of the country’s pension funds. “This will be positive, but if [the foreign cross-listed stocks] aren’t considered local for us, it won’t make much change in the liquidity in the local market in the short term,” Alejandro Perez-Reyes, who oversees $7.5bn in assets as CIO at Prima AFP, tells LatinFinance. He adds that he would still be buying for 2 separate buckets, and not selling local shares to increase holdings in Colombia. No definition on any change to the classification has been given, he adds. New York-based equity bankers remain skeptical that a combined Peru-Colombia exchange could divert issuers away from the equity hubs of New York, Brazil and London when it comes to larger transactions.