JPMorgan is cutting exposure to Mexico credit by selling $1m UMS old 2019s and shifting to market weight from overweight in the model EMBIG portfolio. “While the cyclical rebound and higher oil prices remain positives, we prefer to reduce exposure to low beta credits,” says the bank. On the UMS curve, JPM advises reduced duration exposure by switching out of 2019s and 2022s into 2017s and 2015s. Mexico has modestly outperformed the index (3.1% ytd versus 2.8%), despite digesting $3bn of issuance so far from Pemex and the sovereign, says JPM. The bank favors high yielding countries like Argentina and Venezuela, as well as frontier credits like Belize, the Dominican Republic and Jamaica. JPM also notes that while LatAm high grade credit is not necessarily rich versus the US, there is little scope for outperformance. On the other hand, it sees scope for significant underperformance should credit more generally, and sovereign credit in particular, come under renewed pressure.
Category: Regions
Isagen Borrows for Hydro Project
Colombian state-controlled power generation company Isagen has signed a COP1.54trn ($812m) 10-year loan to finance the Sogamoso hydroelectric project, it says. The company does not disclose the rate on the loan, which includes a 3-year grace period. The group of lenders is composed of Bancolombia, Banco de Bogota, Davivienda, Banco de Occidente, Banco Popular, Banco Agrario, AV Villas, BCSC, Banco Santander and Helm Bank. The 820MW plant on the Sogamoso River in eastern Colombia is expected to cost COP4.5trn. Isagen will add the loan funds to those raised in a COP450bn September bond sale and a $140m CAF loan agreed in December. The company says it may issue another COP400bn in bonds to support the project, which it says requires COP2.7trn in financing.
EPM Telecom Unit Readies Domestic Bond
EPM Telecomunicaciones, the telecom unit of Colombia’s Empresas Publicas de Medellin, is preparing to sell Friday COP200bn in bonds on the domestic market, according to a broker managing the sale. It has the option to sell up to COP300bn. The issuer, also known by its Une brand, will split the sale into 5-year and 10-year tranches each paying interest at a spread over IPC. Coreval and Bancolombia are managing the sale, rated AAA.
ISA Wraps Brasil Bond Tender
ISA Capital do Brasil, the holdco for the Colombian transmission company’s 89% ownership in Sao Paulo utility CTEEP, is set to repurchase $324m of its $354m in 8.8% 2017 bonds, following a tender offer, it says. Holders agree to swap the bonds for $1,082.50 per $1,000.00 principal, or $1,117.50 per $1,000.00 before February 24, and to waive a set of covenants on the bond issue. HSBC is managing the process. ISA Capital plans to fund the buyback through new debt issuance in Brazil’s domestic markets, according to a company official, with a deal to be announced as soon as this week. The 2017 bonds were originally sold in January 2007 as part of a 2-tranche sale through ABN and JPMorgan that also included $200m in 7.875% 2012 bonds.
Cencosud Shareholder Checks Out
Peru’s Wong Group has sold the remaining stake it owns in Cencosud via a secondary offering on the Santiago stock exchange. The 2.3% stake, which Wong acquired through the sale of its supermarket chain to Cencosud in 2007, was sold for $201m equivalent. The company priced 49.8m shares late Monday at CLP2,053.00, a 3.6% discount to the previous session’s close of CLP2,130.50. The deal was 40% sold to international investors, according to a banker at a shop leading the deal, thanks to a strong effort to diversify the company’s investor base. The remainder went to local buyers. All told, the 144a secondary sale garnered a book of 2.5x the deal size. JPMorgan and LarrainVial led the offering, with both managing local and international distribution.
Mexico Sponsors Bid for Road Package
Mexico’s government is set to open bids today for the Northeast toll road package, the next in the line of the group popularly known as Farac. Seven bidders are said to be in the hunt for the 30-year concession, including locals Ideal and ICA, and notable foreigners such as Brazil’s CCR and Spain’s OHL. The package includes two roads and three bridges in the states of Nuevo Leon and Tamaulipas. An official estimate of the package’s value has not been given, though it is thought to be worth at least $300m-equivelant. The Northeast package, the Mitla-Tehuantepec package, the Lerma Tres Marías cluster, the Pacific South and the Chihuahua and Valles-Tamuín beltways projects on offer this year are estimated to require a total investment of around MXP10bn.
GMAC Mexicana Readies ABS
GMAC Mexicana has completed investor meetings for a MXP1.45bn auto-loan securitization, and is preparing to price later this month. The 2015 bond is backed by a pool of 15,221 auto loans totaling MXP1.9bn with an average life of 1.3 years. The sale is expected March 24, according to a report from Scotia Capital, and is the first pure securitization of auto loans in Mexico, according to officials managing the deal. Banamex and HSBC are managing the sale, expected to be rated AAA on a national scale. The offer will also include a MXP245m subordinated piece, rated A, that GMAC plans to hold on to.
Brazil, Mexico Converge Via CME
LatAm’s 2 biggest exchanges will soon be connected through a single trading platform, thanks to a deal by the Chicago based-CME Group to bring Mexico’s Bolsa onto its Globex system. With Brazil’s BM&FBovespa already plugged into Globex, which stretches across 85 countries and boasts 120,000 active users, and the Mexican exchange soon to come online thanks to a deal announced Monday, a new intra-regional flow between LatAm’s liquidity centers will be established. Bryan Durkin, COO of CME, tells LatinFinance the focus of the new efforts has been to foster interconnectivity with all of its clients, but notes the linkup does provide an unprecedented link between Brazilian and Mexican investors. “A number of investors in Brazil have expressed strong interest in Mexico,” says Durkin. CME Group has agreed to purchase a 1.9% stake in Mexico’s stock exchange, the BMV, for $17m. The agreement is similar to a 2008 deal between CME and the BM&FBovespa that involves mutual order routing into and out of both exchanges, as well as an asset swap with commensurate board participation by the CME on the local exchanges. The deal also includes Mexico’s derivatives exchange MesDer.
LatAm Equity Funds Attract Flows
While GEM equity funds posted modest outflows on the week ended March 3, LatAm enjoyed inflows, with Mexico equity funds hitting a 19-week high, according to EPFR Global. Performance was also positive for LatAm equity in the week ended March 4, with Lipper data showing an improvement of 4.34%. However, year-to-date they are still losing 3.62%. EM funds gained 4.14% in the week and are down 1.71% ytd while global small and mid-cap funds have risen 2.86% in the week and 0.45% ytd.
Digicel Plans Bonds for Subsidiary Stake
Jamaica-based telecom Digicel is preparing to raise $600m in bonds to fund the purchase of a 72% stake in Digicel Pacific Limited, according to investors and sell-side analyst reports. No definite timeframe has been heard specified for the transaction, though it is expected within the next few weeks if market conditions permit. The bond would most likely be issued at the Digicel Group Limited level, according to a report from Barclays, which expects a 10-year tenor. The shop says the market likely did not expect the transaction so soon after last year’s purchase of 43% of a Central American unit. “While operations have performed very well, allowing the company to successfully deleverage, Digicel has taken various opportunities to quickly re-leverage,” says Barclays. “As such, we believe the company will likely have to pay at least a 25bp concession, and the news could continue to weigh on bond prices in the near term,” it adds. Digicel communicated its intentions to buy a majority stake in Digicel Pacific last month, according to a note sent to bondholders at the time. DPL is 84% owned by Digicel’s majority shareholder and chairman Denis O’Brien, and 16% by third-party investors and management. It operates in 6 Pacific island markets. It is not know if mandates have been awarded, though, Credit Suisse arranged a “non-deal” investor lunch last week in New York for Digicel. The telecom raised $500m in 8.25% of 2017 NC4 bonds in a November sale managed by Citi, Credit Suisse and JPMorgan.