Telmex International is set to begin roadshowing today its first domestic bond, looking to revive a seasonally quiet Mexican debt market wrong footed by a clash between investors and issuers. The unit spun off from Telmex last year has filed for up to MXP5bn, and plans to meet investors through the end of the week, according to a banker on the sale. Pricing of a 3-year floating-rate AA deal is likely next week, via BBVA and Inbursa. Proceeds are for general corporate purposes, which may include refinancing debt. Telmex brought the last sizeable local corporate bond issue, MXP4bn each in 2011 and 2013 floaters paying TIIE plus 74bp and 95bp, respectively. However, corporate issuance has subsided since the AAA July issue. A Femsa sale of up to MXP6bn is expected in the next few weeks, but it is among those waiting for tension between buy and sell sides to ease. Investors have demanded tighter covenants since the crisis began, and recently the Amafore pension managers association and Amis insurance company association stated details of covenants they would like to see, according to Mexico City-based bankers. These include balance sheet-related restrictions, and procedural changes for transactions, such as setting the price range on debt deals 48 hours before pricing. The letter detailing the proposal was a “request,” notes a local investor, who adds that such covenants are common in international markets, and that it follows a long dialogue with issuers. However, the sell-side finds the demands excessive, with the chief complaint being that one set of covenant guidelines could not applicable to all types of issuer. A group of banks including Banamex, BBVA, HSBC and Santander is heard preparing a response, with the intention of reaching a consensus and allowing issuance to proceed. High-quality issuers like Telmex International are nonetheless preparing to go to market, while others who would like to are waiting.
Category: Regions
Crunch Bops Caribbean Hotel Development
In the first half of 2009, construction on 21 hotels in the Caribbean has been scrapped, says Lodging Econometrics, a US-based hotel real estate research firm. The corresponding period of 2008 saw the same number of projects cancelled. Atlanta-based PKF Hospitality Research senior vice president Scott Smith blames the credit crunch. “In the past, many Caribbean mixed-use projects have relied on deposits received from the pre-sale of residential units to help finance the construction of the lodging component,” says Smith. However, this has changed. “Deposits from residential buyers are no longer sufficient to cover the financing of hotels,” he says, adding that, for example, Westin hotels in the Dominican Republic and St. Lucia, which were more than 50% complete when cancelled, had residential components. Smith adds that 2009 may see the same downward trend as in 2008 or even worse and he expects a slow recovery in 2010. In 2008 a total of 43 hotel projects were scrapped in the region, according to Lodging Econometrics.
Alestra Gets 36% in Buyback
Mexico’s Alestra plans to repurchase $70m of its 8% 2010 bonds, following the conclusion of a tender offer, according to an investor relations official. The amount represents 36% of the bonds, or $109m of the original $340m principal. The telecom owned by Grupo Alfa and AT&T launched the offer for the entire outstanding amount in July. It is funded by proceeds from an August 12 sale of $200m in new 9.50% of 2014 bonds. Citi and Morgan Stanley managed the both the tender offer and the new issue.
Race for BTC Heats Up
Several strategics and private equity shops with experience in the telecom industry have expressed interest in acquiring a 51% stake in the state-owned Bahamas Telecommunications Company (BTC), according to Mario Gutierrez, the Citi banker hired in July to lead the sale effort. He declines to name potential buyers, but an industry analyst says America Movil and Telefonica would be likely suitors. Due diligence is scheduled to begin in September. A person close to the transaction estimates that the company as a whole could be worth about $600m, equal to about 6x 2008 Ebitda.
Employees Seen Unlikely Buyers of Isagen
Management and employees of Colombia’s Isagen have announced they are interested in acquiring the 57.66% stake in their employer through a management buy out. Based on the closing price of Isagen’s shares August 24, the stake is worth $1.8bn. However, a banker close to the negotiations is skeptical about the workers’ chances. “I find it very difficult for them to do. They could buy up shares, but I doubt they will be able to buy the entire stake. This is a huge company. Even for a multinational it would not be an easy acquisition to make,” he says. The employee group, called “Duenos de Isagen,” values the stake at around $1.5bn and says that it intends to get financing from private equity groups, which the banker close to the deal also says is unlikely. The banker also says that Colinversiones, rumored to be a possible bidder, might be able to consume the government’s stake in Isagen, as the asset is in line with its core business of power plants and energy generation. He adds that the deal “would still be a big bite to chew” for the company. Credit Suisse and Inverlink are advising Isagen on a sale. Shares closed at COP2,320, up 1.09%, Monday.
Mexico Aids States with Oil ABS
Mexico plans to use MXP13bn from its oil stabilization fund to back a MXP36bn debt securitization to help state governments cope with revenue shortfalls caused by a falling oil prices. Details still being finalized, but Hacienda is working with state governments to use funds from the FEIEF state stabilization fund to support a 13-year bank deal done through a special purpose vehicle backed by the states, according to a government official close to the process. The MXP13bn will be used to buy a zero-coupon bond, worth MXP36bn in 13 years, to guarantee principal. The transaction could be amortized earlier than 13 years if enough money is accumulated in the fund, the government official says. A deal is expected in the next few weeks, with banks now being invited to participate. The sizeable deal does not cause concern from a credit perspective, but nor does it address Mexico’s multiple macroeconomic problems. “Issuing more debt is not really attacking the fiscal problems. The way to do that is to come up with a sustainable revenue stream,” says Shelly Shetty, senior director at Fitch. “I don’t see it as a bad signal. As long as Mexico is able to do counter-cyclical policy, they should be able to do it,” says Alberto Bernal, analyst at Bulltick Capital Markets.
Banxico Pauses on Rates
As expected, Banxico left its monetary policy rate at 4.5% Friday. The Mexican central bank had cut the rate by 375bp since mid-January and Mexico’s economy continues to contract at an alarming pace. Credit Suisse maintains its view that no more rate cuts will materialize in the remainder of 2009. However, Banxico gave a glimpse of hope for the Mexican economy, based the expectation of a less severe contraction in 2Q, compared to 1Q. Market consensus indicates that Mexico’s GDP will have contracted 10.8% in 2Q 2009, after plunging 21.5% in the first quarter because of deterioration in industrial activity. Barclays, which agrees that there will be no more cuts this year, believes the bank will gradually normalize monetary policy in March. However, RBC expects the bank to begin raising rates in 10Q3 for a cumulative 150bp in hikes to 6.0% by end-2010. Market consensus sees the rate at 5.5% by the end of next year.
Sandals Makes Distressed Buy
All inclusive resort company Sandals has acquired the Four Seasons Great Exuma at Emerald Bay in the Bahamas, which shut its doors in May because of the economic downturn. Although the buyer does not say how much it paid for the 500-acre property, industry sources estimate it paid “under $100m.” Construction of the resort required a $350m investment. According to the Bahamas government, the resort’s owner-developer Emerald Bay Resort Holdings defaulted on a $120m construction loan from Mitsui Sumitomo. Shortly afterward, in June 2007, PricewaterhouseCoopers was appointed as receiver. The resort will be renamed Sandals Emerald Bay and reopen in January.
Promigas Charges Up Local Sale
Colombia’s Promigas is preparing to sell COP400bn ($200m) in bonds on Colombia’s domestic market, in a sale set for August 27. The gas provider is offering 7, 10 and 12-year bonds paying a spread over the IPC inflation index. Proceeds will refinance existing debt. Bancolombia is managing the sale, rated AAA on a national scale. Also this week, Avianca plans to sell COP500m Tuesday and Titularizadora Colombiana will follow Wednesday with a COP400bn RMBS offer.
Pegasus Sales Takes Off
The sale of the Jamaican government’s 59.81% stake in the Pegasus Hotel has officially taken off, Lissant Mitchell, senior vice president of Scotia DBG, tells LatinFinance. Scotia DBG was appointed in January to sell the stake, which represents 71.9m shares, or roughly $10m. Mitchell explains that expressions of interest will be accepted until September 30 and that a pre-qualification process will begin “a few weeks later.” He also says some international hoteliers and investors had previously made expressions of interest. According to the hotel’s financial statements, as of the year ended March 31, it had about JMD1.0bn in revenue and net profit of JMD55.2m. The Jamaican government is selling what it considers non-core assets, but Mitchell says Scotia is only handling the sale of the Pegasus. Pegasus shares closed at JMD12.54 on August 20, taking the value of the stake to almost JMD901.6m.