Mexico’s CFE is planning to issue up to MXP4bn in 2 local market tranches, according to Moody’s, which rates the deal Baa1 globally and Aaa.mx locally. The proposed notes would be the first and second draw downs under a new 5 year MXP12bn certificados bursatiles set to be authorized by the CNBV. The program will be established at Fideicomiso F/411, a trust operated by Bank of America Mexico’s fiduciary division on behalf of CFE. Individually, the size of each of the two instruments could be up to MXP4bn, with combined principal not to exceed MXP4bn. The proposed issuance includes amortizing inflation indexed and nominal fixed rate senior unsecured notes, with tenors up to 10 years, says Moody’s. CFE will use proceeds from the issuance for refinancing certain public works investments. CFE, wholly-owned by the Mexican federal government, is Mexico’s dominant, vertically-integrated electric utility and the largest electric utility in LatAm, with installed generation capacity of close to 50GW, including independent power providers, according to Moody’s. The Mexican government does not guarantee CFE debt, but Moody’s believes there is a high likelihood of government support in the case of distress.
Category: Regions
Chocolates Gets Tasty Rating
Duff & Phelps has assigned a AAA national scale rating to an upcoming COP500m bond from Colombia’s Grupo Nacional de Chocolates. GNC plans to sell following Colombian regulatory approval, which should be in mid-August. Bancolombia has been hired to manage the process. In its last DCM foray, GNC sold $40m equivalent of “Inca” bonds in Peru in July 2008.
Colombia Seen Holding Rates
Goldman Sachs expects the Colombian central bank to hold the policy rate unchanged at 4.50% at today’s meeting. “The balance of risks on inflation is very favorable and there is now a high probability that inflation will undershoot the target in 2009. 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),” the shop says. Morgan Stanley does not anticipate fresh easing either, indicating that Colombia’s central bank has already signaled that the easing cycle had come to an end, following 550bp of cumulative reductions since December.
Panamanian Bank Gets Ex-Merrill VP
Panama’s Global Bank has appointed as CFO Jorge Vallarino, a former VP in Merrill Lynch’s Mexico City based global markets and investment banking unit. Vallerino, a Panamanian citizen apparently related to the bank’s owner, departed BofA-Merrill last Friday after wrapping up an existing assignment, and started his new job this week. He was with Merrill for 3 years in Mexico and a year in the New York DCM group. Global Bank is understood to be considering branching out into DCM and M&A advisory, leveraging some of the new CFO’s skills. Global Bank is Panama’s second largest locally owned bank, according to the IFC, which says it is active in both the corporate and retail segments. The bank and subsidiaries had $1.97bn in total assets, $1.42bn in deposits and $14.46m in net profit as of March 31.
Deutsche Taps Mexico Sales Head
Iker Kutz, recently a director at BofA-Merrill’s Mexico fixed income desk, has moved to Deutsche Bank in Mexico. He will be a director and head of institutional sales for the German bank, based in DF. In May, Deutsche appointed former Merrill Mexico country head Alberto Ardura as MD and head of LatAm DCM corporate coverage, based in New York. It earlier in the year hired derivatives trading rainmaker Karan Madan, who quit Merrill to become the German shop’s new head of LatAm debt. The Kutz departure coincides with the exit last week of Jorge Vallarino, a VP in Merrill Lynch’s Mexico City based global markets and investment banking unit. Both have apparently been replaced, and BofA-Merrill is said to be making additional hires in corporate and investment banking in Mexico. The Mexico office is now run by former BofA country head and workout specialist Orlando Loera, leaving Laurent Massart and Pedro Giral as the sole remaining senior Merrill officials. “If they do what they say they will, and use some of the balance sheet and muscle of Bank of America, there should be a lot of opportunity,” says a Mexico-based banker familiar with Merrill’s operations. Separately, Pablo Maschinist, a VP in the LatAm sales and trading team in NY is also heard quitting, apparently for a hedge fund. He was apparently still with the shop Thursday. “The company’s policy is not to comment on staff,” says a BofA-Merrill spokeswoman, when asked about the Kutz, Vallerino and Maschinist departures.
JPMorgan Chops Peru Forecast
JPMorgan revised downward its 2009 GDP growth forecast for Peru to 1.7% from 2.2% owing to poor performance in April and May. The shop says GDP in 2Q will likely post another sequential retreat following the 6.2% quarter-over-quarter annualized drop in Q1, reinforcing the view that Peru has joined the global recession. This is not the first time JPMorgan has chopped its Peru forecast. In early July it reduced to 2.2% from 3.5%.
Colpatria Grows Bond Program
Colombia’s Banco Colpatria has authorized the bank to sell up to COP600bn through its domestic bond program, it says, up from COP400m. The bank announced plans to sell up to COP400m earlier this year, but has yet to indicate when it plans to sell the notes or any further details.
Colombia Bond Feeding Frenzy Continues
Investors’ hearty appetite for Colombian credit shows no sign of waning, with Empresas Publicas de Medellin (EPM) getting more than $6.5bn in orders for a of $500m in 2019 bonds. The municipally owned Colombian utility priced at 98.292 with a 7.625% coupon to yield 7.875%, or UST+432.5bp, the tight end of price guidance. Investors and analysts had expected at least 8% for the first-time issuer. The yield is about 140bp-145bp wide of the sovereign, and follows Ecopetrol’s 2019 bond which last week priced about 100bp over Colombia, at UST+410bp, and garnered $9bn in demand. Bankers away from the deal say the pickup to the sovereign is within an acceptable range of 125bp-150bp. “I think we came at the right price. The market has been very good in the last week,” EPM CFO Oscar Herrera tells LatinFinance. He notes that DCM should remain open for other corporates. Despite extraordinary demand, Herrera says EPM could not have upsized without additional government approval. He adds that a pickup of 142bp to the sovereign is appropriate for a debut issuer. The bond was trading up 1.5-2.0 points in the gray, according to investors, who expect it to rally further. “I see about 40bp in it, so I think it might still have a way to go,” says a participating EM investor. Some 250 accounts came in, according to bankers on the transaction, with about $2.40bn from the US, $1.80bn from Colombian accounts, and $1.25bn from Europeans. JPMorgan and Bank of America-Merrill Lynch managed the sale, rated Baa3/BB+. Proceeds will help fund the utility’s ambitious growth plans, which include international expansion.
Telmex Internacional Plans Domestic Issue
Telmex Internacional has filed for a floating-rate bond sale of up to MXP5bn in Mexico’s domestic market. It does not specify tenor on the bond, rated AA on a national scale. Inbursa is managing the transaction, the first long-term placement from a MXP10bn shelf. The unit of Telmex – housing non-Mexico LatAm business and the Mexican yellow pages business – plans to use proceeds for general corporate purposes, including refinancing debt. Telmex Internacional was spun off from Telmex in June of 2008 and listed in Mexico and the US.
EPM Set to Price 2019
A $500m 2019 bond from Empresas Publicas de Medellin was looking at more than $4bn in orders as of late Tuesday, investors say, and is expected to price today. The municipally-owned Colombian utility issued yield guidance at 8.0% area Tuesday morning, and indicated that the size would not grow. The talk on what is to be EPM’s first bond in international markets was in line with investors’ expectations, following Monday whispers of low 8% area. It puts the trade 160bp-180bp wide of the sovereign 2019s. Last week, compatriot Ecopetrol’s 2019s got 7.677% yield, or about 100bp wide to Colombia. RBS in a research note puts fair value of EPM notes at 8.10%-8.40%, noting low leverage (0.9x) and lack of structural subordination of cashflows. This makes it about 50bp-60bp tighter than Empresa de Energia de Bogota’s 7-year 2014 on a duration-adjusted basis. Execution of EPM’s $4.9bn 6-year investment plan is the credit’s main risk, RBS says. The official use of proceeds is general corporate purposes, with EPM having communicated its intentions to grow significantly in Colombia and abroad. Bank of America-Merrill Lynch and JPMorgan are managing the transaction, rated Baa3/BB+.