Mexico’s Servicios Corporativos Javer is talking 13% area on a $160m-$200m 5-year through BofA-Merrill and Credit Suisse, which is due to price today. The Ba3/BB minus 144a/Reg S senior unsecured issue has a change of control put at 101. Proceeds will repay around $39m in holdco Proyectos del Noreste debt via dividend payment and also cover general corporate purposes, says Fitch. It assigns a BB minus rating and assumes 51%-70% recovery in the event of default. Javer will hedge interest and a portion of the principal against foreign exchange risk, says Moody’s, which notes that 100% of the issuer’s corporate debt will be in USD, while Javer cashflow is in MXP. The company specializes in construction and commercialization of affordable entry-level, middle income, and residential housing in Mexico.
Category: Regions
T&T Credit Down, But Not Out
Growth in credit to the private sector has slowed significantly in Trinidad & Tobago, to about 1% in the first half of 2009 from about 19% in the first half of 2008, says Suresh Sookoo, CEO of RBTT Bank. The drop, he says, is not attributable to a lack of financing, but instead “to a flattening in loan demand as consumer spending and the private sector slows down.” He also notes tells LatinFinance that non-performing loans, which he says were at a historic low right before the global financial downturn, might increase from a current average of 3.0%. Catherine Kumar, president and country head for Trinidad & Tobago’s RBTT Bank last week resigned effective September 10. Sookoo says a replacement has not yet been appointed.
S&P Sees Gruma Settling Debt Issue
S&P believes Mexican tortilla maker Gruma will be able to convert its derivative instruments into a term loan, but is keeping the company’s B+ ratings on credit watch negative. “We have determined that the company’s announcement that it had obtained an extension until August 24, to conclude negotiations with its derivatives counterparties to convert $726.6m related to these instruments into term loans will not affect the CreditWatch action,” the agency says. Although the company has not finalized the details of such loans, S&P expects them a secured 7.5-years facility at Libor plus 2.875% for the first 3 years. “The high likelihood that it will successfully negotiate its term loan mitigates most of our concerns regarding Gruma’s foreign-exchange derivative exposure. We could, therefore, affirm the rating at B+ once the company closes the term loans transactions,” S&P adds.
Mexico Takes Another GDP Hit
Mexican Real GDP fell by 11.1% year-on-year (yoy) in May, up from -8.2% yoy during Q1 and -12.0% yoy in April. On a month on month seasonally adjusted basis, real GDP declined 1.0% from April, says Goldman Sachs, which notes that this follows 1.3% and 0.4% declines in March and April, respectively. The decline was less than the 13% contraction predicted by Goldman, but it still expects an 8.4% contraction in the full year. “Banxico will substantially downgrade its real GDP growth forecast for 2009, and may also reduce its inflation forecast path for 4Q2009 and 2010,” says Goldman. However, Goldman notes that there is a fair chance that May will mark the bottom of the current real business cycle given the gradual normalization of services related activity in June post the swine flu infection peak and accommodation in the inventory/industrial sector. The shrinkage comes amid growing bearishness about Mexico and talk that it may be downgraded. “After basking in the glow of the high grade world for the better part of the past decade, the Mexican sovereign and its wide range of corporates are now firmly ensconced in the universe of risky assets,” says Walter Molano, research director at BCP. “Any progress on structural reforms in the new congress is likely to be slow and modest,” says Citi in an equity report. “As a result, we expect a downgrade of Mexico’s credit rating by one or more agencies before year-end,” it adds.
Gruma Gets More Time for Debt Talks
Mexican tortilla maker Gruma says in a filing with the local exchange that it has been granted an extension, until August 24, to continue talks to convert $726.6m in FX derivatives into loans. The previous deadline was July 24, but the company had already warned it would need more time. Prior to that, the deadline was July 22, but Gruma asked for a 2-day extension. Goldman Sachs is advising Gruma.
Grupo Mexico Offers Options to Asarco Debtors
In an ongoing attempt to keep bankrupt miner Asarco, Grupo Mexico subsidiary Americas Mining Corp (AMC) is offering Asarco creditors 3 options that it says bring superior value than other offers Sterlite and debtors have made. In the first option, AMC would pay the principal amount of claims, if it loses the case, related to a lawsuit in which Asarco accuses AMC of driving it into bankruptcy. In this case, AMC would pay 97% in cash and equivalents, consisting of $3.2bn, as well as the remaining 3% from amounts recovered from various litigation proceedings, including against Sterlite. The second option consists of a payment of $1.1bn, plus a 9-year promissory note for $770m which the debtors say has a present value of $309m, says Grupo Mexico. The third option, offering the same terms as the previous option, gives creditors the option of converting the $770 promissory note through a cash exchange on the closing date.
UBS Pactual Chops Banorte to Neutral
UBS Pactual has downgraded Banorte’s stock to neutral from buy as it sees valuations as “stretchy.” But not all is bad news for the Mexican bank, as the shop sees a recent $150m injection from the IFC as positive as it strengthens Banorte’s capital base. UBS Pactual also increased its price target to MXP37.5 per share. On July 27, the shares closed at MXP32.5.
Marubeni Buys into Peru Water Company
Japan’s Marubeni says it has acquired a 29% stake in Peruvian water utility Consorcio Agua Azul from local private equity shop AC Capitales, which is exiting the utility. Terms were not disclosed and the sellers were not available for comment, as Monday was a public holiday in Peru. However, Marubeni says the acquisition makes it the largest shareholder in the utility. AC acquired the stake in late 2006 for $8.4m from Italian companies Impregilo and Acea, according to Peru-based law firm Payet, Rey, Cauvi, which acted as legal counsel on the acquisition in December 2006. Rodrigo, Elias, Medrano, also based in Peru, had originally advised Impregilo and Acea on the sale of the stake to AC Capitales, and acted as the seller’s legal advisor on the sale of the stake to Marubeni, a source close to the shop tells LatinFinance.
Colombia Holds Steady on Rates
In line with market expectations, Colombia’s central bank has decided not to cut its monetary policy rate, leaving it at 4.5%. “The balance of risks on inflation is very favorable and there is now a high probability that inflation will undershoot the target in 2009,” says Goldman Sachs. “Actual inflation continues to surprise on the downside and inflation expectations continue to move down (and in some cases are already under-shooting the target),” it adds. Morgan Stanley had not anticipated new cuts either, as the central bank had already signaled that the easing cycle had come to an end. It looks for the rate to remain at 4.50% into 2010.
ECM/DCM Await Mexican Cement Spree
A positive outcome to Cemex’s arduous $14.5bn refinancing is likely to lead to a slew of equity and bond issuance by the fallen Mexican bluechip. ING analyst Diego Torres points to Cemex’s suggestion of the likelihood new issuance in its most recent filing with the SEC. He adds that new equity would not only help capitalize the company, but send a clear message to bondholders that perpetual coupons will be serviced on time, and not be deferred. Cemex needs a receptive bond market if it hopes to begin taking out some of its newly rolled over bank debt. At the end of last week, Cemex perps were trading at 47; its euro 2037s were at around 38, while the euro 2014 traded in the 64 area, according to a sellside shop. Its ADR closed at $9.80, down a fraction of a percent. Cemex will Tuesday unveil is quarterly figures, and hold a conference call Wednesday. The company will be pelted with questions on the progress of its debt refinancing and investors are likely to position themselves in the securities, depending on the answers. Cemex asked its bank lenders to approve its renegotiation by today, but many are heard still working through credit committees. While it may be too early to declare mission accomplished, Cemex is likely to seek to provide encouraging indications of progress.