After investing in 20% of a MXP3.4bn Certificado de Capital de Desarrollo (CCD) issued in December by Australia’s Macquarie, and a likely similar investment in an infrastructure CCD from LatAm Capital Advisors, the Mexican government plans to continue supporting infrastructure-focused CCDs. “The objective is not to let any infrastructure project suffer from lack of finance,” says Sergio Forte, deputy director of investment banking at government infrastructure bank Banobras. Forte says there are 7 funds in the pipeline seeking liquidity, and that bank could invest as much as $1bn equivalent within the next year. Forte was speaking at the LatinFinance Latin America Europe Investors Forum last week in London.
Category: Regions
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Mexico Eyes MXP Syndication, Euros
Mexico’s government is planning a third domestic bond syndication, and is also considering a euro-denominated bond. “We would like to continue to build benchmarks,” says Marco Oviedo, Mexican deputy director general of public credit, noting the 2 auctions this year – the first ever – helped boost liquidity. Oviedo says the finance ministry plans a September sale of 5-year Mbonos. It raised MXP25bn in 10-year notes and MXP10bn in 30-year Udi-denominated bonds in separate auctions this year, the first times it has held the large auctions designed to bring instant liquidity, rather than do multiple smaller sales, as in the past. “As long as market conditions improve, we are looking to find new investors, and we would like to issue in euros and we are exploring that,” Oviedo says. He notes that the market conditions are not attractive, but Mexico hopes to be able to tap that market by the end of the year. GBP and yen issuance are also possibilities, he adds. Oviedo stresses that Mexico has already met its borrowing needs for 2010. Oviedo spoke at the LatinFinance Latin America Europe Investors Forum last week in London.
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Colombia, Chile Local DCM Rekindle
The pace of local bond issuance in Colombia and Chile is expected to quicken in the second half of the year. Francisco Chavez, a fixed income analyst in Colombian brokerage Corredores Asociados says that already brisk activity will increase after the new government has been elected. “This will bring more stability to the market and reduce uncertainty,” he explains, adding that low rates will also support an increase in activity. Findeter is readying a COP300bn ($150m) issue and Banco Popular also has plans to hit the market. The most recent issuers have also been financial institutions, including Bancoldex (COP382.4bn), Corficolombiana (COP86.3bn) and Citi (COP100bn), with publisher Caravajal (COP400bn) being one of the few large corporate issuers this year. So far in 2010, some COP5.56trn in bonds has been issued, according to the local bolsa, more than double the COP2.75trn seen last year in the same period. The same pickup in activity is expected in Chile, which has been much slower this year. “There will be more issuance in Chile in the second half of the year, especially with long-term tenors, but it will not be a significant increase,” says Juan Cristobal Peralta, a DCM banker with Banchile-Citi. “So far, this year is the slowest ever, but that’s because many companies raised funds last year,” he explains, adding that last year about $7bn was issued, compared to the annual average of about $3bn. Mexico’s America Movil raised UF5m ($193m) in 2035 bonds last month, though no other large deals are seen in the immediate pipeline. In the year to date, Chile has seen just UF12m in flow, versus UF78m for the corresponding period of 2009, according to data from Celfin Capital.
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Colombia’s Popular to Issue Bonds
Colombia’s Banco Popular is planning to issue COP200bn ($100m) in local bonds June 9, but grow that to COP300bn depending on demand. The issue is rated AAA by local ratings agency BRC Investor Services. Proceeds will be used for working capital. Popular will handle the sale itself.
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Edomex Pushes Back
State of Mexico (Edomex) is moving until later this month a novel MXP4.3bn 20-year deal securitizing future flows of income from residential property title fees, according to a banker running it. A deal had been penciled in for June 8, but a 1-2 week delay is now expected, owing to holdups at the regulator. Edomex would mark the first sizeable non-residential mortgage ABS in Mexico since the federal government raised MXP32bn on behalf of its states in a transaction backed by the FEIEF oil stabilization fund in September. Edomex has been working on the transaction since the middle of last year. The 2030 deal has a 14-year average life, pays fixed rate and is divided into 2 tranches. A MXP3.0bn tranche will feature a 100% guarantee from OPIC, while a MXP1.3bn slice carries a 30% first loss guarantee from CAF. Both portions are expected to be rated AAA on a national scale. Banamex and HSBC are managing the sale, which is structured by MBIA. Elsewhere in MXP ABS, government mortgage lender Infonavit is expected to return to the cedevis market June 16.
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Cemex Wraps Up Peso Liability Management
Cemex is repurchasing MXP2.64bn in local bonds, just over 43% of the MXP6.11bn in 4 series of its outstanding 2010 and 2011 it was targeting in a tender offer. The bonds were bought back at close to par, versus trading levels around 98 cents, Cemex CFO Rodrigo Trevino tells LatinFinance. “If you pay a premium, you’re better off keeping the cash in the bank, or using it to prepay the refinanced debt,” he adds. “We retired as many as it made economic sense to us at the level.” Cemex retired MXP483m nominal amount in notes due November 5, MXP628m in bonds due November 26, MXP75m in notes due March 10 2011 and MXP1.46bn in a separate series due the same day. “We have cash on hand for the rest, so we’re not concerned,” says Trevino. “It’s a way of proactively managing your liquidity and refinancing risk,” he adds. Cemex plans to fund the repurchase with proceeds from a March $650m sale of convertible bonds. BBVA Bancomer and Santander led the exchange, with HSBC as co-manager. The series of certificados bursatiles included in the offer represent all long term certificados bursatiles issued by Cemex maturing through March 10 2011. The B rated cement producer said Thursday it would use approximately $450m from free cashflow to reduce debt. Shares dropped 1.5% after Cemex Thursday cut Ebitda guidance to approximately $2.75bn from $2.90bn. Total indebtedness has declined by approximately $550m relative to March 31, aided by the currency composition of total debt.
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Dollars Trump Euros for Bond Issuers
Recent deals from Votorantim and Vale have bankers pitching LatAm bond issuers to attack euro-denominated markets, but larger European-based investors doubt this will become a serious trend. “Liquidity is to be found only in the dollar market,” says Jean-Dominique Butikofer, head of EM fixed-income at UBP. Despite that, the euro-denominated market has open and shut many times, he explains. And it can offer attractive diversification and funding costs for issuers, but not great value for investors with dollar alternatives. “Sometimes the Euro issuance can seem very compelling, but the problem is they are for a much smaller investor base, they will always remain expensive -– you will not see spreads narrow such that the arbitrage disappears,” says Esther Chan, who helps manage $5bn in EM bonds at Aberdeen Asset Management. A New York-based DCM banker says he continues to pitch euro issuance to high-quality LatAm clients. He adds that although there might be a lack of demand from larger buyers, retail investors and pension funds with euro-denominated liabilities offer a sufficient investor base. Butikofer and Chan spoke at the LatinFinance Latin America Europe Investors Forum this week in London. Votorantim sold EUR750m of 5.250% coupon 2017 bonds to yield 5.319% in April, and Vale sold EUR750m in 4.375% coupon 2018 bonds to yield 4.441% in March.
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Sovereigns Sit Pretty in Hubbub
Though spreads have widened amid Europe-fueled volatility, LatAm sovereigns are calm about external borrowing, having largely prefunded the year. “We are exploring new ways of issuance,” says Marco Oviedo, Mexican deputy director general of public credit. This includes different currencies and more syndicated domestic debt auctions. Oviedo says Mexico has covered 2010 funding needs and would consider opportunistic issuance this year under the right conditions. “Our guidelines are to improve the composition of the debt,” says Paulo Valle, Brazil’s undersecretary for public credit, noting the sovereign does not need to access the market. Meanwhile, Uruguay has been able to keep out of the dollar markets since the Lehman collapse and is meeting its 2010 needs though local borrowing and multilateral funding. Liability management remains a possibility, says Carlos Steneri, director of public credit. “We are opportunistic in tapping the international market, to maintain our global curve and obtain information on our pricing levels,” Steneri adds. The buyside still appears to be positive on the region’s more prudent borrowers. “The local bond markets in Brazil rallied during May as market became concerned with global growth,” says Sam Finkelstein, head of EM debt at Goldman Sachs Asset Management, which has $15bn in dedicated EM investment. “This highlights the conviction that investors have that these countries will continue to be able to pursue counter-cyclical policies,” he adds. He notes record inflows in the last several months have demonstrated investor confidence and the opportunity to pick up extra yield in countries where there is diminished macro risk than in some developed markets. All spoke at the LatinFinance Latin America Europe Investors forum in London Thursday.
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Fitch Turns Peru Positive
Fitch changed the outlook on Peru’s BBB minus ratings to positive from stable to reflect the sovereign’s healthy growth trajectory, which is supported by the sovereign’s disciplined macroeconomic policies. Fitch expects Peru’s growth to reach at least 6% in 2010 due to the global recovery and the residual effects of accommodative policies. This compares with Fitch’s BBB median growth forecast of 3.7% during the same period. IMF MD Dominique Strauss-Kahn last week said Peru sets an example to other EM of how to reach a fast track of growth and poverty reduction by carrying out strong economic policies. “With a recovery underway that will see growth in Peru of between 6%-7% this year, the challenge now is to manage success by continuing the timely and gradual phasing out stimulus and avoid the build-up of inflationary pressures, which hit the poor hardest,” Strauss Kahn said, following a trip to Lima.
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Goldcorp Sells Mexico Mine
Canada’s Goldcorp says it is selling its gold and silver San Dimas mine in Mexico to Mala Noche Resources for CAD500m, of which it will receive CAD275m in cash, CAD175m in Mala Noche common shares and a CAD50m promissory note payable over 5 years bearing an interest rate of 6% per year. Goldcorp, which says it will redeploy the proceeds into funding its growth without diluting shareholders, will own about 30% of Mala Noche after the transaction closes. Closing of the transaction is expected to occur on or about July 30. In 2009, San Dimas produced 113,000 ounces of gold and 5.1m ounces of silver. Goldcorp’s legal advisors are Cassels Brock & Blackwell and Lawson Lundell. A fairness opinion was given by CIBC World Markets.