Mexican tilemaker Lamosa has until June 30 to sort out its debt issues with bank lenders, according to a filing. Lenders agreed to give the company until then before acting on its breached leverage covenants on some $900m in debt. Scotia Capital is leading the talks, which involve a $675m 4.7-year average life dual currency loan and a $225m 7-year second lien facility from OTPP. A banker on the deal says Lamosa’s debt to Ebitda stood at around 4.8x a year ago, but has since spiked to around 6.2x, thanks in part to MXP depreciation and an LNG hedge that locked the company in just before a drop in prices. Lamosa wants to obtain waivers for leverage ratio covenants tripped on senior and subordinated loans. Other lenders include BBVA, Banamex, Comerica, HSBC, JPMorgan, Unicredit, Banorte, ING, Merrill Lynch, Inbursa, ABN AMRO (now RBS), Santander, and WestLB.
Category: Regions
HY Comeback Limps Over Finish Line
Jamaican telecom Digicel has closed books on its 2014 NC3 dollar bond offer at $335m, after picking up a few additional orders Monday following a closing of books Friday. The transaction comes up $100m short of the announced amount, but still earns it the distinction of the region’s first high-yield issue since July. It priced the 12% notes at 89.601 to yield 15%, after giving 15% area guidance Friday morning. The B1 rated transaction through the Digicel Limited unit drew orders from high-yield and EM investors in the US and Europe, according to a banker managing the sale. Investors and bankers away from the deal had expected the bond to price in the 14%-15% range, based on trading levels of the existing 2012s and 2014s in the low-to-mid teens. Bankers away from the deal say it is encouraging that it was completed. But thin demand shows that investors are not yet confident in the region’s high-yield issuers, and will continue to be extremely demanding. Digicel is raising funds for working capital and the purchase of a $260m equity stake in its Digicel Central America unit from the company’s main shareholder, chairman and founder Denis O’Brien. Citi, Credit Suisse and JPMorgan managed the transaction. The last LatAm high-yield deal was B+ rated Mexican marine contractor Oceanografia, pricing in July a $335m 11.25% 2015 bond to yield 11.50%, via Morgan Stanley.
Hacienda View on Banamex Expected
News about the Mexican finance ministry’s position on a forced sale by Citi of Banamex is expected this week, according to RBC Capital Markets. “Hacienda is expected to define its view on the issue this week. We believe there are a number of Mexicans interested in the acquisition and that most members of the opposition would like the bank to return to Mexican hands,” says the shop in a report issued Monday. It adds that the issue will be a key driver for the MXP this week. Since Citi ran into severe trouble – and especially since the US government upped its stake – markets have been speculating about a sale of the lucrative Banamex operations. Under Mexican law the finance ministry will decide, say local attorneys. However, lawyers do not expect Hacienda to force a sale on legal grounds. Nonetheless, political pressure may become too great. Banamex is a sensitive case, as an iconic institution that has for many years been a leading domestic bank. It operates 19% of the Mexican system, according to Moody’s. Talk of local groups forming to buy Banamex continue to do the rounds. Itau is also mentioned as a potential bidder if Citi opts to sell. According to Rodrigo Conesa Labastida, partner at Ritch Mueller in Mexico City, the price of the US government stake would be 50% of the lowest of either book value or market value of the shares. Citi says it is not planning to sell Banamex.
Tissue and Diaper Maker Readies MXP Bonds
The Mexican unit of consumer products manufacturer Kimberly-Clark is planning to sell up to MXP3.5bn in bonds in the domestic market, according to S&P, which rates the proposed issue AAA on a national scale. The maker of well-known brands including Huggies and Depends diapers and Kleenex tissues can issue bonds of up to 10 years at a fixed or floating rate. The ratings reflect a solid risk profile, low leverage and stable cash flow, S&P says. Kimberly-Clark’s last issuance was MXP2.5bn in 10-year notes priced at the TIIE minus 10bp, in July 2007 through Banamex.
Mexico Stock Market Seeks New Chief
Mexico’s Bolsa Mexicana de Valores is seeking a replacement for current chairman Guillermo Prieto. The local exchange says changes to the board, including announcing the chairman himself, will occur at the company’s annual shareholder meeting, for which a date has yet to be set. Prieto has been chairman of the exchange for nearly 8 years. In the running for the job is Carlos Gutierrez, Merrill Lynch’s former LatAm chairman. The widely respected veteran financier left Merrill earlier this year. Mexico-based sources say that Gutierrez is seriously considering the opportunity. The BMV was one of just 3 IPOs last year. It closed Friday at MXP8.21, down 4.53% on the day.
HY Comeback Fails to Impress
Jamaican telecom Digicel had booked some $300m of its $435m 2014 dollar bond issue as of late Friday. Despite there being room to grow before the transaction closes Monday morning, it is expected to fall well short of the targeted amount. The 12% coupon notes were priced at approximately 89 to yield 15%, according to a banker managing the sale. Though set to be smaller than the planned $435m announced at the beginning of last week, the B1 rated deal through the Digicel Limited unit earns the distinction of the region’s first high-yield issuer in 8 months. After a week of haggling during a roadshow targeting high-yield investors, the issuer came out with 15% area guidance Friday morning, according to investors, after testing appetite at 14% during the week. Though very challenging in this environment, investors say the bond was generally more appealing than that of last week’s fellow high-yield issuer Cemex, given a clearer story and more certainty over how the company will handle additional leverage. Digicel is raising funds for working capital and the purchase of a $260m equity stake in its Digicel Central America unit from the company’s main shareholder, chairman and founder Denis O’Brien. Citi, Credit Suisse and JPMorgan managed the transaction. The last LatAm high-yield deal was B+ rated Mexican marine contractor Oceanografia, pricing in July a $335m 11.25% 2015 bond to yield 11.50%, via Morgan Stanley.
India’s Sterlite Buys Asarco
India’s Sterlite Industries, a subsidiary of Vedanta Resources, is buying the operating assets of US-based Asarco from Grupo Mexico for $1.1bn in cash and $600m in notes. The $600m senior secured non-interest bearing promissory note is payable over 9 years as follows: $20m per year from the end of second year for 7 years; and a terminal payment of $460m at the end of the ninth year, totaling $600m. In the event that the annual average of daily copper prices in a particular year increases beyond $6,000 a tonne, the annual payment in that year will be proportionately increased subject to a maximum of $66.67m and the terminal payment in the ninth year will be correspondingly reduced, keeping the total payment at $600m. LME copper close Friday at just over $3,700. The principal amount of the note will be adjusted for any variations in working capital on closing. The obligations under the note are secured against the assets being acquired and are without any recourse to Sterlite. The agreement is subject to the approval of the US bankruptcy court for the Southern District of Texas, Corpus Christi Division. The acquisition is on a cash free and debt free basis. Sterlite will assume operating liabilities but not legacy liabilities for asbestos and environmental claims for ceased operations. RBS Securities acted as financial advisor and Shearman & Sterling acted as legal advisor to Sterlite, while Barclays Capital and Baker Botts helped Asarco. Grupo Mexico bought Asarco in 1999 for $1.2bn. Asarco subsequently went bankrupt. Sterlite and Grupo Mexico have apparently been working on a deal for months.
Peru Chops Quarter Point, More Expected
Peru’s central bank has cut the monetary policy rate by 25bp to 6.0%, in line with consensus. The bank says inflation has declined for a fourth consecutive month, to stand at 5.49%, and should keep falling. It says inflation should reach the 2.0%-3.0% target by the end of the year. JPMorgan expected a 25bp cut, but believed the odds of a larger 50bp cut were possible given the rate of disinflation in February. Credit Suisse, which had initially expected the central bank to leave the rate unchanged, but later revised its forecast to a 25bp reduction, expects gradual easing to 5.0% by the year-end.
CS Starts Private Banking in Mexico
Credit Suisse has launched a domestic private banking business in Mexico through its Banco Credit Suisse unit. The business will focus on offering advice and investment products and services to high-net worth individuals and families, entrepreneurs, and medium and large-family business owners. Despite the economic slump, the Swiss bank says that this segment is growing in Mexico. Credit Suisse has had a presence in Mexico for more than 30 years, primarily in investment and commercial banking. It established a broker dealer in 2002.
Bancolombia Sells Tier-2 Bonds
Bancolombia has sold COP400bn ($154m) in 2019 and 2024 domestic Tier-2 bonds, according to an official at the bank. The bank priced COP65bn in 10-year fixed notes at 10.70%, COP126bn in 10-year floating-rate bonds at the IPC index plus 6.45%, and COP209bn in 15-year bonds at IPC plus 6.90%. Total demand for the 3 tranches was more than COP575bn. The bonds are the first from a COP1trn program launched this year to support the capital base, and its first Tier-2 issue in local currency. Bancolombia’s own brokerage managed the sale, rated AA+ on a national scale. Next week, fellow financial institutions Titularizadora Colombiana and Findeter plan to sell COP150bn and COP250bn, respectively, in domestic bonds. Bancolombia also announced that it has sold COP218bn ($84.5m) in mortgage loans to Titularizadora Colombiana. Titularizadora plans to offer COP150bn in 10-year fixed-rate bonds backed by a portfolio of mortgages, in a sale expected March 12.