The January 28 daily brief item “Geo Puts CCD on Ice,” misstates the transaction that Mexico’s Geo has canceled. An MXP500m ABS was shelved. A Certificados de Capital de Desarollo (CCD) for its Geo Maquinaria unit, through Banorte and Santander, is still under consideration, says Hans Schroeder, GEO’s head of investor relations and corporate financial planning.
Category: Regions
Posted inDaily Brief
Jamaica Swap Tops 90%
Jamaica’s government says it received submission forms from holders representing more than 90% of the domestic government bonds eligible for its debt exchange. The government also has set 1300 local time February 3 as the new deadline, after announcing a postponement Wednesday to give the island’s financial institutions more time to prepare. In the swap, it is asking holders of JAD700bn ($7.86bn) in some 350 different bonds to exchange for new securities with longer tenors, on a 1-for-1 basis. The expected settlement date for the transaction remains February 16, the government says. Citi is managing the process. February 3 is also the date Jamaica’s request for a $1.3bn 27-month IMF standby agreement will go to the multilateral’s executive board.
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Colombia Rates to Stay Put
Colombia’s central bank is expected to keep its rate on hold at 3.50% today. Bank of America Merrill Lynch expects the bank to stick at this level until June, when it forecasts a 50bp hike to 4.00%. Morgan Stanley meanwhile expects 200bp of interest rate hikes in H2, with the central bank tightening to 5.50% by December. “With inflation at the lowest point since late 1955 and ample slack in the economy there is little in the way of inflation pressure in the near term,” says Morgan Stanley. “But with an aggressive new target – 3% with a 1% tolerance band – and with real rates already in negative territory for the first time in recent history, the central bank is unlikely to cut rates either,” it adds.
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Copeinca Fishes for 9s
Early price expectations for a debut bond from Peru’s Corporacion Pesquera Inca (Copeinca) are in the mid to high 9%s, according to investors. The fishmeal and fish oil producer is expected to bring a $150m 7-year deal in the middle of next week, following a US, Asian and European road show. Copeinca plans to use proceeds from the BB minus transaction to repay debt. Credit Suisse and Santander are managing the sale.
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Pemex Arrives Late to Feast
Mexico’s Pemex, needing to borrow some $3.5bn this year, has tapped the debt markets as expected. However, increasingly challenging market conditions meant a $1bn size at a slightly larger concession than the high-quality issuers that got out earlier in January. The BBB/Baa1 2020 bond priced at 98.788 with a 6.000% coupon to yield 6.162%, or UST plus 250bp, the tight end of 250bp-255bp guidance. Demand reached $3bn, according to bankers on the sale, and the bond was trading around flat to reoffer Thursday afternoon, according to traders. Bankers away from the deal and investors spot the new issue premium at 20bp-25bp, and see it at 90bp-100bp wide of the sovereign, while bankers on it spot the concession at 15bp-20bp. “The bonds came out a bit cheap, which surprised me,” says Eduardo Suarez, corporate analyst at RBC Capital Markets. He notes that Pemex’s operational performance is improving, but would only be reflected gradually in financial results. A participating EM investor agrees it was “reasonably cheap,” noting the yield was not as tight as some high-grade issues earlier this month, likely due to a general widening in markets. Mexico priced a 2020 January 11 to yield 5.250%, or UST plus 142.4bp, a new issue premium below 10bp. “We had the wind at our backs as the market opened, but the equity markets turned during the day. Taking that into account, I think it did well,” says a banker managing the sale. “The issuer did all the right things, but the market may have turned on them a bit,” adds a DCM banker away from the deal. He notes a general preoccupation with earnings numbers, the Greek debt scare, Obama’s bank attack and other news that sapped risk appetite. Some 266 accounts participated in Pemex, according to a banker on the deal, with about 45% coming from the US, 35% from Europe and 20% from LatAm, Asia, and other regions. Barclays, Citi, and Credit Suisse managed the sale. Pemex is also currently roadshowing a 5 and 10-year local bond issue expected at
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Jamaica Extends Exchange Deadline
Jamaica has extended the deadline for its JAD700bn ($7.86bn) domestic debt exchange. A new deadline and an indication of the acceptance rate were expected Wednesday, but had not been released as of the end of the day. The original deadline was January 26. “The government has received an overwhelmingly positive response to the offer, with substantially all institutional investors supporting the transaction,” finance minister Audley Shaw says. However, the government notes that local retail brokers have requested an extension. Also, Jamaica’s request for a $1.3bn 27-month standby agreement from the IMF will go to the IMF’s executive board Feb 3, and not this week, as initially expected. The IMF facility is seen as essential to mitigating possible secondary effects of the swap on the economy, such as FX pressure and liquidity at the island’s financial institutions. In the deal, local investors are being asked to voluntarily exchange non-treasury bill government bonds in a 1-for-1 swap for securities with longer tenors. Over 350 securities would be consolidated into 23 new benchmark bonds, according to Fitch. The maturity extension should be an average 2.5 years, according to RBS. Interest rates – which run as high as 28% on the existing bonds – should be lowered from an average of 18%-19% to 12%, RBS says. The government claims the operation will save JMD40bn annually in interest payments. Citi is managing the process.
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Findeter Issuing Credit Deposit Notes
Colombian state-owned development finance agency Findeter is planning to issue COP225bn ($113m) in credit deposit notes in a Dutch auction. The notes, rated AAA, to be issued via the local stock exchange, will have tranches of 2, 3 and 5 years. Findeter will sell COP50bn in 2-year tranche, COP75bn in the 3-year tranche and COP100bn in the 5-year tranche. The 2 and 3-year tranches will pay a spread over DTF and the 5-year will pay a spread over IPC. Proceeds of the issue will be used to finance lending operations, says Fredy Vivas, a financial officer at Findeter, who adds that the agency is structuring and managing the operation itself.
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Colinversiones Pursues Bancolombia Line
Colombia’s Colinversiones says it will begin negotiations with Bancolombia to obtain a 10-year COP650bn ($325m) loan to refinance its short-term debt and make it long-term. A company spokeswoman says interest rates are still to be negotiated. In addition, the energy-focused company is also considering issuing local bonds worth COP900bn to finance power plant developments.
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Pemex Beats Local Path
Pemex is meeting investors in Mexico this week and next to pitch a new domestic bond transaction in fixed and floating tranches, according to bankers managing the sale. Pricing will happen as soon as the end of next week. The state-owned oil producer is expected to issue around MXP10bn, though it has filed for up to MXP15bn. It can choose between 5-year MXP-denominated floaters and 10-year fixed-rate notes in MXP or UDIs. Proceeds are marked for debt repayment, investment and general corporate purposes. BBVA, HSBC and Santander are managing the sale, rated AAA on a national scale. As with its pair of MXP10bn issuances in April and May of 2009, Pemex brings a big transaction that could help open up local DCM. This year however, supply scarcity has less to do with risk aversion and more with last year’s dispute between institutional investors and issuers that made it tough for all but the bluest-chip borrowers.
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Geo Puts CCD on Ice
A Certificados de Capital de Desarollo (CCD) issuance from Geo Maquinaria in Mexico’s local market appears to be off the table, according to S&P, which has retracted the deal’s AAA rating on a national scale. “The issuance for up to MXP500m has not been placed due to a decision by the company,” the agency says. An IR official at Geo confirms the transaction is on hold at the moment, without offering additional detail. In one of the first CCDs registered last year after authorities defined the asset class, the machine rental unit of Mexican homebuilder Geo planned to sell the quasi-equity securities backed by receivables contracts. HSBC was managing the sale. Would-be issuers have found CCD markets slow going so far, owing to investor scrutiny. Only Red de Carreteras de Occidente, Wamex and Macquarie have managed to close so far.