Category: Regions

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.

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.

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.

Colombian food company Grupo Nacional de Chocolates (GNC) has agreed to acquire Mexico’s Nutresa, which makes chocolates, for $95.3m. The deal, says GNC, is valued at 10x Ebitda. The buyer says it will use financing from banks and cash on hand to make the acquisition. “This transaction fits perfectly with GNC’s strategy and will strengthen its chocolate business in the strategic region that includes Mexico as one of the most attractive markets,” the buyer says. GNC does not reveal if it hired a financial advisor to help with the deal, but an analyst who covers the company speculates that Bancolombia’s investment banking unit may have been involved, since both have worked together before. The analyst says GNC has little debt and, as of September, about COP150bn in cash. An analyst at Colombia’s Bolsa y Renta says the deal is the country’s largest M&A transaction of the past 12 months. The analyst adds that the purchase will help GNC increase chocolate sales by 14%, to COP930bn from the COP818bn expected previously. Bolsa y Renta has a hold recommendation on the stock. GNC did not return calls for comment and a Nutresa spokesman declines to provide any additional information. Bancolombia executives did not respond to calls. The transaction, which awaits approval from Mexico’s antitrust commission, is expected to close in February, says GNC. GNC shares gained 2.4% January 28 to close at COP15,100.

Mexican mortgage lender Su Casita plans to attempt a short-term debt rollover by offering new commercial paper to holders of some MXP840m in CP issued last year, according to regulatory documents. The date of the exchange period has not been set, but Su Casita is aiming for an early-February launch, says a banker managing it. The process could be similar to Cemex’s December offer of $500m in 2011 bonds to holders of notes due 2008-2009. Su Casita will offer new 2010 floating-rate bonds to holders of 5 series of MXP840m in floating-rate CP due between March and June of this year. Santander is managing the operation.

Carlos Slim’s IDEAL is among the likeliest winners of a package of Mexican tollroads whose value is estimated at around MXP40bn ($2.9bn). “We’ve been working on this for a year, and it’s a very attractive asset to us,” Andres Alija, finance and operations manager at IDEAL tells LatinFinance. IDEAL is seen as the most well capitalized bidder at the moment, and among the hungriest for the package of tollroads, part of which surrounds the Tepic-Mazatlan route it already operates. Fonadin’s Paquete del Pacifico is a follow-up to the MXP44bn Farac I, won by ICA and Goldman Sachs Infrastructure Partners in 2007. IDEAL, which claims to be the second largest tollroad operator in Mexico after ICA, is looking to bolster its stature as a major concessionaire. Today it operates 5 concessions. IDEAL teamed up with Macquarie for the first auction and missed winning by a hair. It is waiting to hear confirmation from Macquarie regarding interest in participating as a joint sponsor on an upcoming bid. “Either way, we will definitely be bidding,” remarks Alija. Even competitor ICA notes IDEAL’s strength. “I’m sure they will have a very competitive offer,” says ICA CFO Alonso Quintana. He adds that ICA is “still looking at ways to make a bid.” ICA’s relative coolness with regards to upcoming participation is in part a reflection of the several projects the infrastructure shop already has going on, besides the Farac package it already has. Other bidders may include OHL, Global Via, and Iridium, a unit of Abertis. However, appetite for high-risk projects has dampened significantly, and bankers eyeing the deal wonder how many builders will turn up. “I am very convinced we will receive offers from many bidders,” says Federico Patino, head of Fonadin. “There will be price tension.”

The bid submission deadline for an estimated MXP40bn Paquete del Pacifico tollroad package, also known as Farac II, is poised to be extended for a third time. As of today, the bids are due February 27, but bidding consortia have requested an extension. “It is very likely we will change the date,” Federico Patino, head of Fonadin, Mexico’s national infrastructure fund, tells LatinFinance. “It will definitely be done in the first quarter,” he adds, without being more specific. Patino attributes the delay – which follows an initial postponement in July 2008 and a subsequent one in November – to a host of factors including poor market conditions, difficulties in processing paperwork for the roads, such as environmental approvals, and requests from potential bidders. Alonso Quintana, CFO of ICA, says his shop is still mulling a bid, but has requested an extension, noting that his shop is still in talks with possible partners. The deal’s importance – it is seen as one of the cornerstones of president Calderon’s infrastructure push – merits the extra care in making sure it moves ahead smoothly, says Patino. The official acknowledges that market conditions for a large situation could hardly be worse.

Mexican development bank Banobras is willing to write a check for up to MXP18bn in the form of a 20-25 year loan to help the winning bidder of the Paquete del Pacifico tollroad concession, known in the market as Farac II, finance construction and maintenance. Bids for the 30-year concession are due February 27 – though a delay looks likely – and a number of local and international consortia, including groups led by ICA, IDEAL and OHL are participating. In addition to the Banobras senior loan, Fonadin, the national infrastructure fund holding the assets, will provide the winner with a subordinated tranche of debt worth up to 30% of the project’s total debt. Similar tenors are expected. Officials with knowledge of the sale suggest its value is in the MXP40bn ($2.9bn) area. “This is the biggest tollroad auction in our country’s history,” Federico Patino, head of Fonadin, which is managed by Banobras, tells LatinFinance. Patino adds that once Banobras provides the new facility to the concessionaire, it would look to syndicate out to other banks. He says bidders may also choose to raise funds with commercial banks backing them, if terms are more attractive. Sponsors decline to state who backs their bids, citing fluctuating commitments. Santander, which supported ICA and Goldman in the first auction, is heard backing the same group again. Local institutions like Banorte, Banamex and Inbursa will find funding in MXP less challenging than international banks, some of which still hold sizable pieces of the first Farac loan, despite a desire to get out early. Volatile MXP may also add to reluctance about re-entering the domestic market. The package will be awarded to the bidder who offers the highest price. The sequel is for 850km in brown and greenfield routes, versus Farac I’s 558km. At the time, Farac I was the biggest concession of its type and yielded LatAm’s largest ever local currency loan – a MXP32bn 7-year facility that left sponsors with a lot of cash and, in the ca