Ecuador is expected to sign today a deal with China’s SynoHydro to build the 1,500MW Coca Codo Sinclair hydroelectric project, according to the company overseeing the project. The $2bn project will be funded by a $1.7bn 15-year loan from the Export-Import Bank of China and $300m from the Ecuadorean government, Italo Centenaro, general manager of Coca Codo Sinclair, tells LatinFinance. The China Exim loan has a 6.2% interest rate and a 5-year grace period to match the expected construction time, he says. Construction on the 10-unit project on the Coca River near the Colombian border should begin November 1. Centenaro explains this will be the first Chinese-built power project in Latin America. “Four companies bid, but only the two Chinese companies presented financing, and one of those withdrew, leaving SynoHydro,” he says, adding that SynoHydro also presents a solid hydroelectric construction track record. Electricity generated by the facility is expected to cover 75% of Ecuador’s demand. The project had originally counted on Argentine support, until Argentina’s Enarsa sold its 30% stake in the project to Ecuador’s government for $5.5m, according to local press reports.
Category: Regions
Mexican Issuers Ready Domestic Raises
Kimberly-Clark de Mexico and the Mexican unit of Chilean metals producer Molymet are expected to bring domestic bond deals as soon as Tuesday. Kimberly-Clark is readying a 2014 floating-rate tranche and a 2019 fixed rate tranche denominated in MXP or UDIs. The total amount should be MXP3.5bn, according to S&P, which assigns a AAA national scale rating. Proceeds from the sale, through Banamex and HSBC, will refinance debt. Separately, Chilean metals processor Molymet plans to issue 2011 floaters and 2014 UDI-denominated fixed-rate notes, having filed for up to MXP700m of each. Credit Suisse and Banamex are managing the sale, rated AA/AA+ on a national scale. Proceeds will also refinance debt. Santiago-based Molymet operates a molybdenum processing facility in Cumpas, Sonora, in northwestern Mexico, and is resuming plans for its first Mexican DCM offer after shelving them a year ago.
Peru Holdco Eyes Dollar Bond
IFH Peru, a holding company for retail units and financial services companies including Interbank, plans to sell $100m in 2019 bonds through a Reg S offering. The dollar-denominated bullet notes will be divided into two tranches, with the principal of the second tranche adjusting to the value of the Chilean UF unit, according to reports from S&P and Moody’s giving the deal B+ and Ba3 marks, respectively. Proceeds from the issue will primarily be used by IFH’s retail subsidiaries – which include Supermercados Peruanos and Tiendas Peruanas – to finance the expansion of stores and fund credit card businesses, S&P says. “The ratings reflect IFH’s heavy reliance on dividends coming from a small number of subsidiaries, a certain level of currency mismatch resulting from the proposed notes USD denomination, and the group’s relatively aggressive expansion strategy. These factors are partially mitigated by the group’s good position in Peru’s financial system,” the agency says.
Farac Sponsors Land Novel Hybrids
ICA and Goldman Sachs, which own the concession for the Farac I toll road assets, have raised MXP6.55bn through the issuance of a novel hybrid structure in Mexico. Proceeds are being used to take out a jumbo peso project loan raised in 2007 to acquire the assets. The two have become the first issuer in the newly created certificados de capital de desarollo (CCD) structure. CCDs are certificados burstatiles sold by a trust that holds shares in the Red de Carreteras de Occidente (Farac I) concession, and will be quoted on the Mexican bolsa. A price of MXP77 per CCD was struck with the buyers, exclusively institutional investors, according to ICA, which won the concession in 2007 along with Goldman Sachs Infrastructure Partners for MXP44bn. Each CCD represents 100 B series shares and is due 2038, the year the concession expires. Investors buying the CCDs receive a share of the flows of revenue after the debt is serviced. The instruments may not yield these flows in the first few years, a banker on the deal explains, but once the debt is paid, investors will start to see bigger returns. Additionally, ICA and Goldman plan to add about MXP1.6bn and MXP400m, respectively, in new equity through the subscription of new A series shares, ICA says. “This is sending a message that they are not pulling out,” says a banker on the deal, emphasizing that the proceeds are going towards paying the debt, and not repaying shareholders. Following the deal, Goldman will own 54.5% of the trust, ICA 13.6% and the CCD holders 31.7%, ICA says. Santander and Goldman managed the transaction. The deal is the second of its type, which gives Mexico’s pension funds the ability to invest in equity, and the first under a new regulatory structure defined earlier this year. “This is probably the most important in the Mexican financing market that we’ve seen recently,” Mexico’s head of public credit Gerardo Rodriguez tells LatinFinance. Set to follow as soon as this week are CCD deals from Wamex and Mac
IDEAL Tipped for Farac Sequel
Mexico’s IDEAL last week presented the highest bid for the North Pacific highways concession, or Farac II, and will likely win, Mexico’s head of public credit Gerardo Rodriguez tells LatinFinance. IDEAL bid MXP3.2bn and there were 2 other contenders, Spain’s Global Via with ICA, and Spain’s OHL alone. The pitches to build and operate 2 roads and operate them for 30 years is now being assessed by a technical committee. “If there’s no issue there, IDEAL should be awarded the concession in 2-3 weeks’ time,” says Rodriguez. Banobras and the national infrastructure fund are providing senior financing for the deal, which requires MXP8bn total investment. Bids on a third toll road package in Tamaulipas are due in November. “We think it should also show that there’s plenty of interest there,” says Rodriguez.
LatAm Recovery Underway
LatAm and the Caribbean are showing signs of stabilization and recovery, according to the IMF’s World Economic Outlook report. However, it states the region’s GDP should still contract by 2.5% in 2009 before growing by 2.9% in 2010. There are indications that a recovery got under way during the Q2 2009, according to the report, and it should gather moderate speed in the second half of the year, led by Brazil. Capital flows have begun to return to the region, and sovereign spreads have narrowed. Industrial production has picked up in many economies, notably Brazil, and the contraction in Mexico is moderating, says the IMF. The recent rebound in commodity prices is also improving the overall outlook for the region thanks to a pickup in commodity exports. Consumer and business confidence have also improved, and retail sales have firmed up, the report indicates.
Genworth Pares Mexico Insurance Holdings
US-based Genworth Financial has sold Mexico-based Genworth Seguros to HDI-Gerling International Holding for $45m. The unit being sold focuses largely on car insurance, but also offers property and casualty, life, and personal accident insurance. Genworth will continue to have a presence in Mexico, focusing on mortgage and so-called lifestyle insurance, which it considers its core businesses, company director Alejandro Rivero-Andreu tells LatinFinance. He adds that the deal was privately negotiated.
CFE Issues Project Bonds
Mexico’s CFE has sold MXP2.6bn in 2024 UDI-denominated bonds on the domestic market. The notes with a 7.5-year average life priced at 5.04%, or 155bp wide of the corresponding UDIbono. The issuer was targeting up to MXP2.75bn, according to a banker managing the sale, but elected to issue MXP2.6bn to achieve a tighter spread than what was available at a higher volume. Total demand for the deal reached MXP3.6bn, says a banker on the trade. Proceeds will go into a trust funding capex projects. The deal is the second such transaction, following MXP3.42bn in 2019s in August. ING managed the sale, rated AAA on a national scale.
Ecopetrol JV Sells Local Bond
Colombian oil pipeline operator Oleoducto de Los Llanos Orientales sold COP500bn ($260m) in inflation-linked bonds on the local market. The 2016 notes pay interest at the IPC inflation index plus 4.88%. The COP500bn total includes a COP50bn overallotment option, as the issue received COP719bn in demand, according to a brokerage managing the sale. ODL plans to use the proceeds to finance construction of its 235km pipeline and return part of the investments to its two owners Ecopetrol (65%) and Canada’s Pacific Rubiales (35%). ODL began transporting oil extracted from the Pacific Rubiales field, also jointly owned by Ecopetrol and Pacific Rubiales, in September. Corficolombiana structured and managed the transaction, rated AAA on a national scale.
LatAm Recession Bottoming Out: S&P
LatAm will see GDP contract by 2.3% in 2009, its sharpest drop in decades, but is expected to grow 3.0% in 2010, S&P says. Mexican GDP is expected to shrink 7.5% in 2009, the sharpest drop in the region, and to rebound 2.5% in 2010. Panama and Peru likely will post the highest growth rates in the region, at 2.3% and 2.0%, respectively, though these numbers are down significantly from the 9.0%-11.0% increases in 2007-2008. In 2010 Panama is expected to expand by 4.5% and Peru 4.0%. S&P believes Brazil will see no growth in 2009, but expand by
4.0% in 2010.