Mexican paper products maker Grupo Papelero Scribe has sold $300m in 10-year bonds at par to yield 8.875%, well through initial investor expectations. The first-time issuer rewrote a $250m deal expected by investors to land in the high 9s into a $300m 2020 NC5 yielding 100bp tighter, apparently through good marketing. “They made a credible case for themselves,” says a West Coast-based bond investor who attended the roadshow. The investor notes that there is not much LatAm paper out there offering such attractive yield. The bond landed well inside 9.125% area guidance and initial talk of low-to-mid 9s. It was heard trading up about 0.5 points Tuesday afternoon. The transaction received $900m in orders and went to about 100 accounts, according to a banker on it. Investors warmed to Scribe, liking its market position and the room it has to improve credit metrics. However, there are some buyside concerns about dividends paid to 25% owner Kimberly Clark that outrank the senior bonds, and possible vulnerability to pulp price shifts. Proceeds are set to repay $262.6m of a term loan facility, and $34m to cover an obligation to Kimberly Clark. Credit Suisse was sole bookrunner on the Ba3/BB minus 144a/Reg S bond, with Morgan Stanley as co-manager. Kimberly Clark sold its Mexican paper business, known as Pimsa, in 2006. Pimsa attempted unsuccessfully to raise $320m in the dollar bond markets that same year, before eventually expanding and becoming Grupo Scribe. After an active 2 weeks, LatAm DCM appears headed for an Easter break, with only Santander Brasil and ABC left to tap this week. Bankers claim to have more Mexican high yield in the pipe for April. Investors are lapping up corporate credit that appears cheap, especially versus Brazil comparables.
Category: Regions
Scribe Set For Bond Debut
Mexican paper products maker Grupo Papelero Scribe is set to price today a $300m bond, after giving yield guidance Monday of 9.125% area. The issuer finished a US and European roadshow Monday for the 2020 NC5 bond, a first issue under its present organization. At announcement, some in the market were expecting high 9%s or even 10%, but investors appear to have warmed to the credit following marketing. “It’s fundamentally better than Durango,” says a New York-based EM investor looking at the deal. He notes that leverage is not too high, and there is room for credit metrics to improve. Credit Suisse is sole bookrunner on the Ba3/BB minus 144a/Reg S bond, with Morgan Stanley as co-manager.
Panama Fund to Sell More State Bonds
Panama’s government-backed Fondo Fiduciario para el Desarrollo (FFD) is preparing to offer $95.9m in existing 6.7% of 2036 sovereign bonds, the government says in an SEC filing. The offer, expected to close this week, is to be accompanied by the sale of an additional $250m of the notes to the Caja de Seguro Social social security fund. It follows a $441m February unloading of 8.875% coupon 2027 sovereign bonds to the same institution. The paper comes out of a pool of various sovereign bonds held by the FFD, which was created in the 1990s with proceeds from various privatizations. It has a total estimated size of about $1bn. Morgan Stanley is managing the trade. In December, the FFD attempted to sell $759.7m in sovereign bonds, including $346.0m of the 2036s, along with the $441.0m 2027s and $62.2m in 8.125% of 2034s. That deal, managed by Citi, was pulled after the bonds dropped in price after the announcement. As part of the agreement between FFD and CSS, Panama agrees not to sell any debt securities with tenors in excess of 15 years through April 30, without prior consent of the CSS. In turn, the CSS will not sell the 2036s it purchased prior to June 1. The filing also details a new special purpose vehicle to hold road assets – including the Corredor Sur concession bought last week from Mexico’s ICA for $420m – of which the FFD and CSS will each own 50%, and contribute $245m equity. The government says it does not expect these deals to increase net debt. “While Panamanian authorities are in effect conducting an “asset management operation”, we are worried about the lack of transparency in fiscal matters that this is going to generate,” says RBS in a report. It adds that the SPV may incur additional fiscal risks or contingencies. “These policy actions, coming so soon after Panama gaining an investment grade rating, are worrisome,” says RBS.
Colombia Keeps Rates On Hold
In line with market expectations, Colombia’s central bank has kept the monetary policy rate on hold at 3.5%. The bank cites better than expected inflation levels, which are at the low end of the target. Annual inflation in February was 2.09%, while aim is 2.00%-4.00%. Local brokerage Corredores Asociados says the rate is likely to stay put for some time to stimulate the economy. Morgan Stanley says Colombia does not appear to be in a hurry to hike rates as inflation data is still benign. “We suspect that recovery may prove stronger [than expected] and the central bank would shift into tightening monetary policy in 2H10,” the shop says.
Mexico Rolls Over IMF Line
The IMF has approved a successor 1-year arrangement for Mexico under its flexible credit line (FCL) in an amount equivalent to about $48bn. “The Mexican authorities stated they intend to treat the arrangement as precautionary and do not intend to draw on the line,” says the fund. The FCL is designed for crisis prevention purposes and provides flexibility to draw at any time. Disbursements are not phased nor conditioned on compliance with policy targets, as in traditional IMF-supported programs. Flexible access is justified by the very strong track records of countries that qualify for the FCL, which gives confidence that their economic policies will remain strong, says the fund.
“Mexico’s very strong policy frameworks and economic fundamentals, together with the additional insurance provided by the successor arrangement under the FCL, put Mexico in a very strong position to deal with other potential risks that could arise in the period ahead as the global economy continues to gradually recover from the crisis,” says John Lipsky, first deputy MD and acting chairman of the IMF board. “Mexico has a sustained record of sound economic policies, and has very strong economic fundamentals and frameworks,” he adds. Lipsky also notes that sizeable downside risks still confront the global economy.
WB Supports Mexico’s Seguro Popular
The World Bank has approved a $1.25bn loan to Mexico to support efforts to increase the number of Mexicans benefitting from the Seguro Popular health insurance plan, while also increasing the plan’s operational efficiency. The project will cost a total of $26.86bn, out of which $1.25bn will be financed by the World Bank and $25.61bn by the corresponding government agency. The facility is an investment loan, denominated in USD and with a maturity of 18 years. The project is expected to close December 31 2013.
Risk Rises on Corredor Sur Bonds
S&P has placed its BBB minus senior unsecured debt rating on ICA Panama’s $150m 20-year bonds on credit watch with negative implications. The bonds are backed by collection rights on Corredor Sur toll road revenues. ICA recently agreed to cede control of the road to the Panama government. “The CreditWatch listing reflects our concerns that the government’s control over ICA Panama could lead to future actions that limit the project’s operating activities and payment capacity,” says S&P. It could lower the rating one notch to reflect the institutional and country risk of the Republic of Panama, it adds. It could also lower the rating further if the debt structure is affected. Corredor Sur is a 19.5km urban toll road in Panama connecting the Panama City downtown area with Tocumen International Airport. The government awarded ICA Panama a 30-year concession to construct, maintain, and operate the road, which has been fully operational since February 2000.
Ecopetrol OKs Bond Issuance
At its annual general meeting, Ecopetrol’s shareholders approved a COP5.5trn ceiling for non-convertible bond issuance, the company says. It says bonds can be issued in Colombia or abroad in 1 or several tranches over the following years. The state oil giant does not specify for how many years the ceiling will be in effect. A company spokesman says Ecopetrol is not working on a bond issue at the moment. Last year, the Colombian oil giant issued $1.5bn in bonds. Besides Colombia, where it has 60% of total production, Ecopetrol is involved in exploration and production activities in Brazil, Peru and the US.
Fonacot Plans Domestic Floater
Mexico’s Fonacot is planning to raise MXP1.95bn through the sale of floating-rate bonds in the domestic market. The issuer is targeting April 28 for the sale of the 2013 bonds, according to regulatory documents. Scotia and BBVA Bancomer are managing the sale, rated AAA on a national scale. Fonancot plans to use proceeds to add to its lending capability. The state-backed lender last visited the markets in December, selling MXP1.5bn in domestic bonds backed by consumer loans.
Colombia Not Seen Hiking Rates
Colombia’s central bank is expected to keep its monetary policy rate at 3.5% today. Morgan Stanley says the bank does not appear to be in a hurry to hike rates as inflation data is still benign. “We suspect that recovery may prove stronger [than expected] and the central bank would shift into tightening monetary policy in 2H10,” the shop says. Colombia’s Interbolsa also sees no change in policy. “We see the central bank expects a slow recovery and is more afraid of a sudden increase in inflation than another slowdown in the economy,” it says. Annual inflation as of February was 2.09%, the low end of a 2.0%-4.0% target range, according to the central bank.