Colombia is weighing options to deal with a recently announced funding gap of approximately $1bn. “The government has not yet made a decision as to how it will meet this need, and is evaluating options,” says Viviana Lara, Colombia’s general director of public credit, with an eye on maintaining debt at the same level as stated in its original budget. The sovereign will take a few weeks to make a decision, she explains, and the government will look to minimize the amount of local debt it places to avoid crowding out private issuers who have enjoyed a strong window so far this year. The shortfall is owed to reduced income due to slower growth. The sovereign has completed two liability management exchanges of its local debt, but has no immediate plans to do so with its dollar debt, Lara says.
Category: Regions
Colombia to Kick Off Infrastructure Fund
Colombia is set to formally launch Tuesday a $500m-$700m infrastructure fund administered by Ashmore Investment Management and local firm Inverlink to support infrastructure projects. “Investors are looking for more opportunities from sovereigns at the moment,” Viviana Lara, Colombia’s director of public credit tells LatinFinance. The fund, which will also receive sponsorship from the IDB, CAF and Bancoldex, will be open to all types of projects that offer strong returns and has the possibility to grow beyond $750m, Lara says. The official declines to indicate any likely projects, but says that the government has been receiving many viable proposals. Macquarie is serving as technical advisor.
Ecopetrol Pushes Debt Issue
Colombian oil giant Ecopetrol has ample liquidity but it hopes to get its first bond issue placed soon to help boost balance sheet efficiency. “There is urgency, we’re already in April,” Ecopetrol president Javier Gutierrez tells LatinFinance. However, specifics remain to be worked out. “We’re considering all possibilities, but this year, we’ll go out and get financing,” adds the official. Shareholders recently approved a plan to sell up to $4.1bn in bonds in international and local markets. A deal would mark Ecopetrol’s first public debt placement in over 10 years and investors are expected to jump on it. “We’re in conversations with a lot of banks, taking proposals. But there’s still no specific definition,” says Gutierrez. Options include bonds and loans in both local and international markets, and Gutierrez says that domestic demand appears strong. Local brokerages expect an offering of as much as COP3trn ($1.2bn) in size. An international bond deal would meanwhile be highly dependent on an opportune window, given the likelihood of a double B rating. Ecopetrol is rated BB+ by Fitch. New York-based bankers met Ecopetrol in Medellin over the weekend during IDB meetings, but they do not expect bond business short term. “Over the next few months, we’ll put together a structure for financing plans,” says Gutierrez. Asked whether Ecopetrol is in a hurry, Gutierrez says the company is proceeding “without hurry, but without pause.” Speaking of equity, the official says Ecopetrol is not planning to target an issue at foreign investors. It can raise another 9.9% capitalization, following a successful locally-targeted IPO in 2007 which was equivalent to 10.1% of the company. “In the second round, we have to go back to the same people as in the first phase, fundamentally Colombian citizens and the local financial sector,” says the official. He adds that the appetite locally will likely be very strong. “We want to first issue debt to cut the cost of capital slightly,” Gutier
Miners Assess Colombia Aluminum Smelter
Alcoa, Vale and Alcan are assessing the possibility of building an aluminum smelter in Colombia, minister of mines and energy Hernan Martinez tells LatinFinance. Raw materials will likely be sourced in Jamaica or Brazil and cost will depend on size. Colombia is telling potential developers that it will build power supplies big enough to support the project. A drop in world aluminum prices has apparently slowed the process, but a new plant is still expected. “They have not abandoned the idea,” says Martinez. The minister adds that there are several other metals and minerals projects being assessed in Colombia, including a possible titanium venture.
Gigante Unit Under Investigation
Mexico retailer Grupo Gigante says fiscal authorities are investigating one of its subsidiaries in relation to transactions made abroad in conjunction with providers. In relation to that, it has registered a MXP485m provision to cover potential costs arising from the investigation. The company also announced it will invest MXP10bn as part of its 2009-2013 strategic plan. In 2009 alone, it says it plans to invest MXP1.4bn and forecasts sales will total MXP15bn, up from MXP8.4bn in 2008. Also for this year, it expects to open 108 units in all formats and create 1,816 jobs.
Moody’s Negative on Merrill Mexico
Moody’s has cut Bank of America Mexico’s global local currency deposit ratings to Baa3/prime-3 from A2/prime-2 and assigned a negative outlook. Moody’s also downgraded Merrill Lynch Mexico’s long term Mexican national scale issuer rating to Aa2.mx (negative) from Aaa.mx and confirmed the short term rating of MX-1. The actions follow last week’s moves on Bank of America Corporation and subsidiaries. “The performance of the Mexican subsidiary and its local franchise and financial metrics continue to position it well within the group of foreign wholesale bank peers operating in Mexico,” says the agency. “It appears that the difficulties faced by its parent bank have thus far had no material effect on the Mexican operations. Nevertheless, Moody’s negative outlook on the bank’s ratings is predicated on potential future pressures on [Bank of America Mexico] as it is so linked to a now weaker US parent. The negative outlook also incorporates the less favorable business and economic environment present in Mexico,” it adds.
Belize GDP to Grow 1%: IMF
The IMF sees Belize’s GDP growing by 1% in 2009 and inflation dropping to 2.5% from 4.5% in late 2008. The bank says Belize is vulnerable to global developments, as the economy is likely to be affected by declining tourism receipts and remittances, as well as lower FDI. It also says high external debt and relatively low external reserves limit the space for counter-cyclical policy. Belize’s budget for FY2009/10 targets a fiscal deficit of 1.8% of GDP, which will be covered with external loans. The budget, says the IMF, also incorporates a 7% increase in spending. “Over the near term, safeguarding international reserves and strengthening the oversight of the financial system are key priorities,” the IMF says. It adds that lowering debt ratios will require significant adjustments to the fiscal position starting in 2010, to reduce reliance on external borrowing and meet rising interest obligations on the private debt restructured in 2007.
Colombia Plans PR, DR Power Deal
Colombia plans to build a power plant and lines to connect to Puerto Rico and the Dominican Republic, according to a senior government official. “We’ve just signed the exclusivity agreement with Dominican Republic and Puerto Rico,” Colombia’s minister of mines and energy Hernan Martinez tells LatinFinance. He adds the that project is in early stages but is estimated to cost $5bn. EPM and ISA are also working on it. “Now we have to convince the new administration in Puerto Rico,” says the minister.
Santander Colombia Readies Bonds
The Colombian unit of Santander plans to sell Monday up to COP132bn ($53m) in subordinated bonds. The sale includes fixed rate 7 and 10-year bonds paying a maximum of 11% and 7 and 10-year bonds paying IPC plus up to 6.5%, with the total amounts and interest rates of each determined during the sale process. Proceeds will go towards working capital. Santander’s own capital markets unit is managing the sale, rated AA+ on a national scale. The issue follows Bancolombia’s sale of COP400bn in floating-rate subordinated notes March 4.
Behind Scenes, Hacienda Aids Corporates
As Mexican corporates including Gruma, GISSA, Vitro, Comerci, Cemex, Nemak and Lamosa sit down with banks and investors to work out losses stemming from derivatives and soaring debt, the Mexican government has been actively involved in mediating and advising. In addition to its more publicized measures, such as its CP rollover program and USD auctions, Hacienda has through its various appendages sought to push often contentious discussions towards a practical solution, say officials. “We’re trying to coordinate these discussions and make them work,” Gerardo Rodriguez, head of public credit, tells LatinFinance. “We’ve played an important role in putting these talks on a path towards a conclusion, and slowly, I think we’re resolving these problems,” he adds. One tangible solution came last week, when Gruma announced it had reached a preliminary agreement with some of its derivatives counterparties to convert an outstanding negative position into a 7.5-year loan. Government officials say they assisted in that process and hope that more favorable outcomes will follow. Among the other initiatives the state is considering is having development banks like Nafin and Bancomext extend additional lines of credit to the troubled automotive and auto parts sectors, says one development bank official. The initiatives follow yesterday’s news that Mexico is rushing to prop up Cemex and keep the debt laden cement giant from getting entangled in a messy row with lenders. Rumors of the government’s plan to support corporates under pressure have been circling for weeks, but few outside Hacienda anticipated that the state would step in as boldly and swiftly as it appears to have done with the fallen Mexican blue chip. “We are sensitive to the possibility of systemic risk,” says a government official.
(For more see http://www.latinfinance.com/DailyBriefArticles/2170290/Latest_News/Mexico_Rescues_Cemex_Fears_Systemic_Risk.html)