Petrobras has signed an MOU with Japan’s Marubeni to potentially borrow $10bn from the Japanese conglomerate, mines and energy minister Edison Lobao has told local paper Valor in an interview. The proceeds would go towards financing the construction of a large refinery in the state of Maranhao, which would cost a total of $20bn. The facility could be ready as early as 2013, speculates Itau Securities. “Given that the situation is fraught with political issues, which means it shouldn’t be taken for granted, we believe that this is negative news because it puts additional pressure on Petrobras debt levels at a critical moment,” writes Itau analyst Paula Kovarsky in a report. If confirmed, however, this would be another $10bn the Brazilian energy giant would not have to raise elsewhere in the markets. Marubeni would in exchange, demand payment in the form of refined products coming from the facility, according to analyst reports citing the interview. In February, Petrobras said it would seek $10bn from China’s development bank. Petrobras finance officials did not return calls seeking comment.
Category: Regions
JPM Ups EM Debt Exposure, Likes Peru
JPMorgan is moving to neutral from underweight in its EMBIG model portfolio through adjustments that include raising Peru to overweight from neutral. Its portfolio beta rises to 0.99, although the shop also has a high cash balance at 10.4%. JPMorgan already moved Argentina and Venezuela to marketweight from underweight over the past 3 weeks. It meanwhile reduces holdings in very short-dated Mexican debt and rotated to longer-end bonds, but keeps the overall country exposure unchanged. “Our less bearish view on EM sovereign debt is because we believe that the likelihood of a sovereign default is very low, while the yield spread on the EMBIG to 3-month USD Libor has moved back to levels last seen in early 2003 (over 850bp, from a low of 120bp),” says JPMorgan. To raise Peru to overweight, the shop buys $0.5m of the 2025 bond at 101.00. It notes that although ‘33s look slightly cheaper on the curve, it is wary of the higher USD price. “We expect fundamentals to continue to justify the credit’s safe haven status,” says the shop. Peru has been a modest but reliable outperformer over both a year-to-date (+2.9% versus -1.3% for the EMBIG) and 12-month horizon (-2.4% versus -12.3%). JPMorgan sees growth dropping sharply from 9.8% in 2008 to 3.5% in 2009, but says Peru will still see the most resilient growth in the region this year. It also expects a very manageable 2009 fiscal deficit, at around 1% of GDP, notwithstanding a 3 percentage point GDP fiscal stimulus program. “Peru’s balance sheet also remains rock-solid: net public debt is only 12.3% of GDP – well below peers and just one-third the level of 2004. Moreover, the public sector is a net external creditor, with BCRP reserves of $31bn, not only well above the public sector external debt (less than $20bn), but nearly covering the country’s total external debt (public and private),” says JPMorgan.
Santander Prepares COP Sub Bonds
The Colombian unit of Santander is preparing to offer up to COP290bn ($116m) in subordinated bonds, with a sale expected in the next 2 weeks. The bank is set to sell 7-10 year bonds at fixed rate or basis DTF or IPC, to be decided during the sale process. The bank is prepared to pay a maximum 11% for fixed-rate, and DTF plus 6.5% or IPC plus 3.0% for floaters. 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.
CIBC Likely Buyer of Republic Shares
Canadian bank CIBC, which holds a 91% stake in Trinidad & Tobago’s First Caribbean Bank, is said to be the most likely buyer of a 55% stake in Republic Bank being held in trust by the local central bank, bankers say. A local banker says it could cost TTD8bn ($1.3bn) to buy the stake. The central bank assumed the holding after bailing out CL Financial in February. “There are behind-the-scenes discussions to sell Republic’s shares,” says a local banker away from the conversations. “We have been aware that CIBC wants to grow in T&T,” he says. The banker adds that First Caribbean’s share of the T&T banking system is less than 1.0%. Another banker knowledgeable about T&T’s financial sector says that other Canadian banks on the islands would not be likely buyers because of their existing market share. He explains that if Scotiabank were to buy the Republic stake, its market share would increase from 15% to about 50%. RBTT’s would go from 25% to 60%. He also says Republic Bank’s market cap is $2.2bn, while total assets for 2008 were about $6.6bn, according to corporate information.
Ecuador Will Not Honor 2030 Bonds
Ecuador will not make $135m in coupon payments on its global 2030 bonds when a 30-day grace period ends March 15, its finance minister says. “Ecuador has decided not to make the payment at the end of the grace period because it is finishing, with its legal and financial advisors, the proposal for a global solution for the 2012 and 2030 bonds,” minister Elsa Viteri says in a statement. A proposal to repurchase the 2012s and 2030s is expected before the end of the month, according to wire and local news reports citing remarks made Thursday by economy minister Diego Borja. Lazard is advising Ecuador on the buyback offer. The sovereign has now, as widely expected, officially defaulted on 2 of the 3 issues it began studying last year to determine legality. The 2015s – issued when Correa was Finance Minister – have been given a different status and the government says it plans to honor them. Ecuador defaulted on the 2012s in December, and indicated last month it would use a 30-grace period to determine whether it would continue making payments on the 2030.
Guatemala Seen Getting IMF Help
Guatemala is considering negotiating an IMF stand-by arrangement, according to JPMorgan, which cites the fund’s Central America representative Alfred Schipke. “An official IMF delegation is scheduled to travel to Guatemala City later this month to formalize the offer, which is already under consideration by the central bank,” says JPMorgan. “Given that Guatemala is facing no immediate balance of payment issues, the stand-by agreement would be treated as precautionary, part of an overall strategy to enhance market confidence in the government’s policies and to strengthen the country’s financial defenses in the midst of the global crisis,” it adds. The shop notes that while size is uncertain, Guatemala’s IMF quota stands just north of $300m and El Salvador recently inked a similar stand-by worth three times its quota. “We welcome the prospects of a precautionary stand-by for Guatemala at a time when access to international credit sources is severely constrained,” JPMorgan concludes.
El Financiero Still Pursuing Buyer
Debt-laden Mexican newspaper El Financiero is still looking for a buyer after failing to reach agreement with a local family eyeing the assets. According to a local investment banker with knowledge of the sale process, the business newspaper had been in negotiations with the Nacer family – owners of Universidad Icel – but no deal was agreed. A seller may be hard to find, since only the brand name has any real value to potential acquirers, adds the Mexico City-based banker, who declines to be identified. Local media claims that the Nacers had already reached agreement to acquire the asset. They allegedly paid about $20m for El Financiero and assumed its liabilities, said to be around $36m a year, while revenues only added up to $21m. However, a source close to the Nacers says that while in December the family did purchase financial newspaper El Economista for $25m, it has not bought El Financiero. El Financiero is owned and run by Maria del Pilar Estandia and her son. It was founded by her husband Rogelio Cardenas in 1981.
French Oil Company Sells Colombia Assets
Paris-based Maurel & Prom (M&P) is selling assets of its Colombia subsidiary Hocol Petroleum to Ecopetrol for $748m in cash. Proceeds will be used for exploration. M&P is keeping explorations assets including permits for the Muisca, Sabanero, SN-9 and Tangara blocks in Colombia, its 26.35% stake in Lagopetrol in Venezuela, and an exploration permit for block 116 in Peru and interests in Brazil. A company spokesman declines to state whether a bank was hired to assist in the sale. Ecopetrol recently announced it is also acquiring Glencore’s 51% stake in the Cartagena refinery for $549m. In January, Ecopetrol says it planned to spend $870m on acquisitions this year, a number it has already surpassed. The Colombian state oil company said last week it plans to sell up to $8.1bn in bonds through its first public debt placement for over 10 years. Issuance could happen in the international or domestic markets, and proceeds are earmarked for funding investments over the next 3 years.
Cemex Tumbles Down Ratings Ladder
Rating agencies are accused of being too slow to downgrade troubled Mexican corporates. However, Fitch and S&P are taking no chances with Cemex, which Monday surprised the bank market with plans to refinance $14.5bn in loans after abandoning a bond issue. S&P dropped the rating 5 notches, to B minus from BB+, while Fitch chopped it 3, to B from BB. Both imply a high probability of default for the cement company, which was still investment grade for S&P in January. Both agencies keep the credit on review for further downgrade. The new ratings “reflect Cemex’s high leverage, deteriorating economic conditions, poor liquidity and limited access to the capital markets,” Fitch says. Cemex faces challenges as it seeks to renegotiate debt coming due over the next few months, it explains, and risks remain high until it is able to reach a broad agreement allowing it to lengthen the maturity of a significant portion of its debt due 2009-2011. S&P notes that “depressed asset prices and the near-freeze in global credit markets may hamper refinancing efforts and asset sales, causing access to resources to take longer or be lower than we originally expected.” Cemex had been preparing to address its most immediate liquidity issues with the sale of $200m-$500m in notes of 5-10 years. The deal was postponed after it became clear the issuer would face paying a yield at least in the high teens. Citi, BBVA, HSBC, RBS and Santander managed both the January loan renegotiation and attempted bond sale. Bankers familiar with the credit say Cemex will have to sell something big – perhaps at a loss – in order to revive its flagging fortunes. Moody’s does not rate Cemex.
IFC Invests in Jamaica Bank
The IFC is investing $20m in Jamaica’s First Global Bank. The investment is split into a $10m 7-year loan and $10m equity. The loan has a grace period of up to 2 years. The IFC declines to state terms. The equity portion will be invested in the bank’s preferred shares. Funding is expected to enhance First Global’s ability to lend to Jamaican businesses, improving overall access to capital and longer-term financing, the IFC says.