The possibility of another Uribe administration in Colombia is unsettling some investors, but Moody’s says it will not affect the sovereign credit rating. “Given Colombia’s long democratic tradition, a bid for a potential third term by President Uribe would not likely affect the trajectory of Colombia’s ratings,” says Moody’s senior analyst Alessandra Alecci. “Most of the other potential candidates are fairly close to Uribe’s center-right orientation and none would likely change course on economic policy or on the successful security policy.” The comment is made in the agency’s annual report on Colombia, in which Moody’s says the country’s Ba1 foreign currency government bond rating is supported by relative stability in macro-economic policy, an impeccable debt-service track record and financial backing from the US. Key constraints to the rating include structural challenges to the fiscal position in light of increasing inflexibility in expenditures and a narrow revenue base. “Colombia’s persistent external imbalance and its growing dependence on unstable export markets such as Venezuela and Ecuador underscore the country’s relative lack of diversification,” says Moody’s.
Category: Regions
Mexichem Completes Equity Raise, Preps Debt
Mexican chemicals and industrial products manufacturer Mexichem has completed a MXP2.25bn capital raise and is preparing to sell bonds locally and abroad. It issued 153.6m new shares – the full amount planned – to existing investors at MXP14.70 each. The controlling shareholders did not exercise all of their allotment, says the firm, resulting in a 7% increase in the company’s public float, to 35%. The deal announced August 3 was completed over a 15-day period. Banamex, Inbursa and GBM were set to sell anything that was not subscribed. Mexichem is meanwhile targeting the end of September for the sale of MXP2.5bn in 2014 domestic bonds, according to a company finance official. The AA minus rated notes will pay interest at a spread to the TIIE benchmark. Proceeds will refinance debt. Inbursa and Arka are managing that sale, the first from a MXP4bn program registered earlier this year. Mexichem should follow that with a debut dollar bond, the official says, likely $300m at 7-10 years maturity. Mexichem has been in discussions with DCM banks, but the official says a mandate has not yet been awarded. Fitch rates Mexichem BBB-.
Avianca Lands Local Bonds
Avianca has sold COP410bn ($205m) in bonds on Colombia’s domestic market, according to a broker managing the sale, on the back of COP692bn in total demand. In the offer, the Colombian airline placed COP75bn in 2014 bonds at the IPC index plus 5.50%, COP158bn in 2016s at IPC plus 6.30%, and COP266bn in 2019s at IPC plus 6.69%. Proceeds of the bond sale fund the purchase of 4 new aircraft from Airbus and repay bank debt. InterBolsa coordinated the sale, rated AA+ on a national scale.
BNP Lines Up Mexico Outing
Mexico’s BNP Paribas Personal Finance is preparing to issue MXP500m-MXP1bn in floating-rate bonds on the domestic market. The lender is meeting this week with investors, a banker on the deal says, and aims to bring a 2-3-year deal likely in the second week of September. The issue will be priced at a spread over TIIE. BBVA Bancomer is managing the sale. In June, the BNP unit placed its first DCM deal, a MXP1bn 2011 bond at TIIE plus 160bp, through Scotia, Santander and HSBC.
Telmex Wades Into DCM Scrap
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.
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.
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.
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.
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.
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.