Empresas Publicas de Medellin (EPM) has sold COP350bn ($150m) in bonds in Colombia’s domestic market, on the back of COP710bn in demand. The government-owned utility priced COP152bn in 5-year notes at the IPC rate plus 4.94% and COP198bn in 15-year notes at the IPC rate plus 6.24%. The issuer opted not to sell 3-year fixed-rate notes, as demand was skewed to the longer dated tranches, according to a banker managing the sale. EPM plans to use proceeds to finance its investment program. The sale represents the third and last tranche of a COP1trn shelf, following placements of COP367bn in November and COP250bn in January, but the issuer has indicated plans to sell more this year. Citivalores and Alianza Valores managed the sale. The next large sale on tap in Colombia’s domestic market should come from Cementos Argos, expected to sell up to COP640bn, though a date has not been set. EPM is also planning to go overseas with a $500m 10-year bond issue and select banks by the end of this month.
Category: Regions
Walmex Cut to Underweight
Mexico research firm Actinver has chopped its recommendation on Walmex to underweight from overweight. Equities analyst Marisol Huerta says Walmex shares are performing better than industry peers but not outperforming the IPC index. In Actinver’s methodology, stocks rated overweight are expected to yield returns considerably higher than IPC. However, Huertas does see Walmex sales continuing to rise short term, and maintains a target of MXP46.00. Walmex shares closed at MXP39.21 April 20.
Colombia Asks for FCL After All
After Colombia’s finance ministry denied earlier this month the country would ask for a flexible credit line (FCL) from the IMF, yesterday the story changed. Dominique Strauss-Kahn, MD of the IMF, says in a statement that Colombia finance minister Oscar Zuluaga and central bank governor Jose Dario Uribe have expressed interest in a 1-year precautionary FCL arrangement for 900% of Colombia’s IMF quota, or a total of about $10.4bn. Colombia and Peru were seen as the most likely candidates for an FCL, following Mexico’s rally after it adopted the new facility. Mexico got a $47bn 1-year FCL, marking the first LatAm use of the new facility. The deal – equivalent to 10 times Mexico’s fund quota – along with expectations that the government will use a $30bn Fed swap arrangement to help corporates with external amortizations, boosted Mexican markets.
Credit Suisse Revises Peru Forecast
Credit Suisse is reducing its year-end forecast for Peru’s monetary policy rate to 2.5% from 4.5% after the central bank decided to make a 100bp cut to its monetary policy rate April 8. “The steady decline in inflation and the improvement in market inflation expectations give the central bank room to continue to lower interest rates sharply and, thus, to attempt to counter the rapid decline in the economy’s growth rate,” the shop says. Credit Suisse sees inflation at 2.5% by the end of the year, within the central bank’s target range of 1%-3%.
EPM Set for Local Bonds
Empresas Publicas de Medellin (EPM) is set to sell today COP200bn-COP350bn ($84m-$147m) in bonds in Colombia’s domestic market. The government-owned utility will offer 3-year fixed rate notes, and 5 and 15-year notes paying interest at a spread to IPC inflation. The exact rates will be set at auction. The sale represents the third and last tranche of a COP1trn shelf, following placements of COP367bn in November and COP250bn in January. EPM plans to use proceeds to finance its investment program. Citivalores and Alianza Valores are managing the sale. EPM is also in the process of choosing bookrunners for an international issue later this year, likely around $500m in size at approximately 10 years, to help fund acquisitions.
Moody’s Rates CFE Local Issue
Moody’s has given a Baa1 global and Aaa national scale ratings to the upcoming local bond issue from Mexican state-owned energy provider Comision Federal de Electricidad. The CFE has filed to sell up to MXP4bn in peso and UDI-denominated bonds with tenors of up to 12 years, and is awaiting regulatory approval. Moody’s expects CFE to use the proceeds from the notes issuance to refinance public works investments. The CFE has a dominant market position and strong cash generation, the agency says, with risks including important long-term investment needs, significant subsides for residential and agricultural rates, and political interference. Although the government does not guarantee CFE’s obligations, Moody’s would expect a “high” likelihood of government support in the case of distress. BBVA is managing the transaction. It hopes to follow fellow state-owned entity Pemex in reopening Mexico’s market for corporate issuers. April 2, Pemex sold MXP6bn in 2012 bonds at TIIE plus 100bp and MXP4bn in 2016 bonds at a fixed 9.15% in a well-oversubscribed issue that sets price points for CFE.
Ecuador to Announce Restructure Plan
Ecuador’s president was on TV over the weekend talking a big discount on a repurchase of sovereign 2012 and 2030 bonds, according to wires. “Our proposal will be basically to try to repurchase that debt, but with a great discount,” Correa says, Dow Jones reports. Bondholders were last month expecting a cash transaction in which they are asked to take at least a 70% haircut plus past due coupon and accrued interest. Trustee US Bank and law firm Milbank Tweed were working on getting holders of Ecuador’s defaulted 2030 to form an ad-hoc committee. Ecuadorian brokerage Analytica Securities says that the outcome of that committee could be acceleration of payment of principal on defaulted bonds, for which it would need 25% of holders. However, the shop also notes that the prospects of legal action are unclear at best, and may not be more attractive than accepting a government offer. Lazard Freres is advising the sovereign.
Macquarie Unveils MXP Infrastructure Fund
Macquarie is preparing to launch a major MXP-denominated fund focused on equity investment in Mexican infrastructure, Mark Ramsey, president of Macquarie Capital Mexico, tells LatinFinance. “It’s an opportunity to provide Mexican institutions with cash to invest in infrastructure in Mexico and to contribute to the government’s infrastructure plan here,” he says. Ramsey declines to comment on the exact size, noting only that would be “substantial,” and aims to be “hundreds of millions of dollars” equivalent. Macquarie expects to inject its own funds, though Ramsey does not disclose the extent of its participation. The fund aims to launch in the next 3 months, and will be offered mainly to Mexican institutional investors, but also to the international buyside. Ramsey says the aim is to take advantage of opportunities from the Mexican government’s MXP270bn Fonadin infrastructure program. “Mexico has an extremely well-developed and set-out infrastructure program, perhaps more clearly set out than any other country at the moment,” Ramsey says. The Australian bank is eyeing opportunity in roads, rail, ports, water/waste, and renewable energy. He says Macquarie is very optimistic about the long-term prospects for Mexico and LatAm. The international group opened its Mexico unit in January with a staff of 15, its most significant LatAm office to date. The new fund is a part of Macquarie’s initial efforts in Mexico, where it plans to offer the same broad range of advisory and investment banking services as in other markets.
Barclays Cuts Peru Growth Forecast
Barclays has chopped the forecast for this year’s Peru GDP growth to 0.4% from 1.9%. The shop says most recent data shows GDP expanded just 0.19% year-on-year in February, well below expectations of 1.3%. It also revised the inflation forecast to 2.6% from 2.7%. The currency is also expected to lose value, reaching PES3.35 per dollar by the end of the year. April 16 it closed at PES3.08. Barclays also expects the central bank to become more aggressive in cutting rates, and predicts a 150bp reduction in May, followed by 100bp in June, from 5% this week.
Funds Pile Back Into EM Equity
A Bank of America-Merrill Lynch survey of fund managers shows they are jumping back into global EM equity and have an increased appetite for risk. China remains the most popular EM country, with 51% of investors overweight there and 26% of the buyside expecting to see its economy strengthen in the next 12 months. Investors are also overweight Brazil, the survey shows. The most popular GEM sector is consumer discretionary, which BofA-ML says expresses confidence in EM consumers. In the week to April 16, LatAm focused equity funds saw fresh inflows, according to EPFR Global. “Flows into Latin America equity funds were driven by renewed enthusiasm for Brazil’s export story and the resilience of its consumers. Brazil Equity Funds took in another $255m as the value of assets under management climbed to 152% of the beginning of the year total,” says the fund tracker.