Trinidad & Tobago is moving to break up and take ownership of CL Financial Group, which controls some $16bn in assets including one of the country’s largest insurers. T&T’s finance minister and central bank governor are billing the move as a bailout to protect investors. The group’s holdings include majority stakes in Republic Bank and Methanol Holdings, the island’s main methanol producer, several of its own banking units, including CLICO Investment Bank, and its flagship insurance company CLICO Insurance. AM Best, the insurance rating agency which downgraded CLICO on Monday to B from B++, notes CL Financial has run into liquidity problems following a rapid decline in methanol prices and the value of real estate holdings, of which the conglomerate has many. Tightening cross-border credit markets also reduced the holding company’s ability to meet short term debt requirements, while local reports say corporate depositors, including state-owned National Gas Company, withdrew hundreds of millions of dollars at CLICO, CIB and CMMB as they faced their own liquidity problems, further depleting its funding base. The government of T&T says it plans to assume control of CLICO Investment Bank, and transfer its third party liabilities and assets to state-owned First Citizens Bank. The bailout also includes full backing for CLICO Insurance and British American Insurance by the T&T central bank. CL Financial will sell its 55% stake in Republic Bank and the 56% it owns in Methanol Holdings. JPMorgan characterizes the measures as a “pre-emptive move to contain any contagion.” The shop does not believe the troubles at CL Financial are symptomatic of a broader systemic problem. Central bank and finance ministry officials didn’t return calls seeking comment. CLICO officials also declined to return calls.
Category: Regions
Colombia Makes 50bp Cut
Colombia’s central bank has cut the monetary policy rate by 50bp to 9.00%, in line with consensus, and says more cuts are likely. The bank expects the weakness in internal and external demand and the decrease in the prices of basic products to cause a drop in inflation this year. Inflation, which the bank says was 7.67% in December, is expected to reach its target level of 4.5%-5.5% this year. Paul Biszko, senior analyst at RBC Dominion, says he expects the central bank to make a 100bp cut as soon as next month. He expected a 100bp cut on Friday. Goldman Sach’s senior LatAm economist Alberto Ramos expected the central bank to cut 75bp given the “very weak activity figures released over the last few weeks,” but had acknowledges that the sharp depreciation of the COP in recent days and residual inflationary pressures in January might have tilted the central bank into making a 50bp cut.
GMD Seeks Wharf Funds, Gets State Project
Infrastructure developer Grupo Mexicano de Desarrollo (GMD) is seeking $64m in financing to develop a wharf at the Terminales Portuarias del Pacifico, says a company spokeswoman. She adds that Carbonser, a joint venture GMD set up with Techint, and Cemex unit Transenergy, offered the winning bid to develop the project in 2006 and had lined up financing from Hypo’s local subsidiary. However, she adds, Hypo ran into trouble afterward, leaving the venture without financing, which has become very difficult to come by. The developer seeks to build the wharf and will operate it for 30 years to recoup its investment. Meanwhile, State of Mexico has assigned to GMD the construction of the first phase of the Bicentenary Viaduct project in Zumpango. The first phase, says GMD, is estimated to cost MXP400m. A GMD spokeswoman says she expects GMD to be assigned all three phases of the project, which would require a total investment of almost MXP1.5bn. “This was not an auction, the government selected GMD for the project since we have worked together in many projects before,” she says. State of Mexico will pay 20% up front and the rest in installments.
Ecopetrol Mulls Peru Stake
Ecopetrol has been studying the possibility of buying a stake in Peru’s Petrotech for about 10 months, according to an Ecopetrol spokesman, who adds that no deal has been signed yet. A spokeswoman at Colombia’s Ministry of Mines and Energy says that minister Hernan Martinez met with Ecopetrol and that the company says it will decide whether to buy a stake in the Peruvian firm in a few months. Ecopetrol intends to spend some $870m on acquisitions in 2009. Calls to Petrotech parent company Offshore International Group, based in Houston, were not returned.
Farac Takeout Bonds on Back Burner
Few, if any, lenders expect ICA and Goldman Sachs to take out a 7-year MXP32bn mini-perm used to acquire the Farac I concession, any time soon, given the poor state of cross border and local Mexican markets. Those anxious to get out will have to take a deep breath, as a bond sale to pay down the jumbo local currency loan is definitely a ways off. “We are working with Afores to see what their interest is,” Alonso Quintana, CFO of ICA, tells LatinFinance. “We have 7 years to do this,” he adds. In 2007, some lenders in the facility expressed frustration at the sponsors’ lack of transparency on timing of the takeouts, which they expected would take place within several months of the loan funding. The facility was led by Santander, Dexia and NordLB, with WestLB, ING, Inbursa and Banobras as MLAs. IDEAL’s July 2008 placement of MXP7bn in local bonds backed by tollroad assets sparked hope that a similar transaction could be executed for Farac takeouts. While the IDEAL deal seems to have confirmed the structure’s viability, a plan to actually to do so is still a ways off. The notes were placed with local pension and mutual funds.
China Bears Peru Gifts
China-Peru trade has rocketed amid heightened interest from the Asian nation in LatAm raw materials. However, some are suspicious of China’s motives.
BEST SUB-SOVEREIGN FINANCING
Capitalizing on upgrades and market opportunity, State of Mexico declined to use any major investment banks for its 25 billion peso refinance which extended duration and slashed the price on most liabilities.
Moody’s Negative on CIE
Moody’s has chopped Mexico’s CIE to B2 from Ba3 and to Ba1.mx from A3.mx, citing weak liquidity, high refinancing risk and low free cashflow visibility. The outlook on the ratings is negative. “As of September 30, 2008, cash on hand plus marketable securities represented only 47% of adjusted short term debt maturities (which includes adjustments for factoring of accounts receivable and operating leases), down from 63% in June 2008 and 98% in December 2007. In addition, free cashflow has been negative, mostly because of high working capital needs,” Moody’s notes. It adds that the company has maturities coming up soon. They include MXP80m in local CP due in March, MXP280m in local notes due in April, MXP500m in local notes due in December and MXP650m in local notes due April 2010. The company also has MXP1.4bn in local notes maturing in October next year.
Vitro Bondholders Told to Call Lawyers
Mexico’s Vitro plans to miss $44.8m in interest payments due Monday to preserve cash so it can continue operations. The glassmaker owes $12.9m on its 8.625% of 2012 bonds and $31.9m on its 9.125% of 2017s, and will have a 30-day grace period. The decision was prompted by a notice of default from 4 bank counterparties to Vitro derivative contracts, claiming a lack of payments totaling $293m. Vitro has been in discussion with derivative counterparties since disclosing a negative position of $227m in October that reached $358m as of year-end. Blackstone, Vitro’s advisor on the derivative and debt processes, told bondholders this week in a conference call to organize and seek legal counsel, according to a bondholder who participated. The call did not give further details of the company’s plans, the investor adds. Officials at Vitro and Blackstone decline to comment on the process. The outstanding total amount of the bonds is about $1.2bn. Meanwhile, Moody’s put on review for possible downgrade the Baa1 rating of the certificates VENACB 05 of Covisa, Alcali and Comercializadora issued in 2005 by ABN AMRO as trustee. The certificates are backed by trade receivables generated by Covisa and Alcali, which are glass container subsidiaries of Vitro.
New Pemex 2019 Trades Up
Pemex’s 2019 bond issued Tuesday was trading up slightly late Thursday, in the 99.40-99.75 range, according to traders. The bond priced at 99.313, about 20-30bp wide of where the Mexican state-owned oil company’s 2018’s traded at the time. The 2019 has outperformed, traders say, closing the gap to trade on top of the 2018. The 3x demand for the issue, as well as the aftermarket performance of the Codelco 2019 7.5% bond issued last week, has given LatAm high-grade corporate issuers a wider window to work with. Pemex sold $2bn in 2019 notes paying 8.00%, priced to yield 8.25% or UST+570bp, through HSBC, Citi and Calyon.