Law firm Jones Day has made its first physical entry into LatAm by opening an office in Mexico City. A firm spokesman says that to enter the Mexican market, it integrated local firm De Ovando Y Martinez del Campo, with which it had worked with in the past. Now the Mexican firm will operate under the Jones Day name. Jones Day’s LatAm practice consists of approximately 50 lawyers, based in Mexico City, Madrid, New York, and around the world. The spokesman says that the firm chose to enter Mexico because “80% of our clients already have a presence there.” He adds that the firm is considering expanding into Brazil, but that no concrete plans have been made yet.
Category: Regions
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Ecuador to Honor 2015 Payment
Ecuador’s finance ministry plans to make a $31m coupon payment on its 9.375% global 2015 bond, after using a 1-month grace period to decide on its obligation. The move represents a turnaround from the decision last month to default on its 12% 2012 notes. The government has said it views the 2015’s legality differently than that of the 2012 and 10% 2030 bonds, which a government panel last year determined the country was pressured into issuing at “usurious” rates. The coupon payment for the 2030 bonds is due next month. “Paying ones debt’s when the capacity to do so is well established is a positive development,” says Goldman Sachs. “However, the government’s attempt to default selectively on its commercial bonded debt might turn problematic due to existing pari-passu and cross-default contractual clauses that protect bondholders against attempts at debt service payment discrimination by the issuer,” it adds. Ecuador reiterated plans to buy back up to $3.8bn in the 2012, 2015 and 2030 global bonds at a deep discount, beginning as soon as this month. The government is expected to reveal its buyback and restructuring plans in the coming days, according wire reports citing finance minister Elsa Viteri.
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Genomma Plans Stock Buyback
Mexican pharmaceuticals company Genomma Lab plans to launch next week a program to buy back up to MXP100m of its stock. The pharmaceuticals maker which went public in June 2008 has 530m shares outstanding. The shares closed Monday at MXP9.51, representing a decline of 41% since debuting at MXP16.
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Bimbo Lures Lenders to M&A Loan
Bimbo’s relationship lenders – which in December put up $2.3bn to help the Mexican baker acquire assets from Weston Foods – are looking to reduce exposure by syndicating out $1.7bn in 3 and 5-year loans. Bankers hope the transaction will provide a price benchmark to a market sorely lacking order. The margin on the 3-year facility is Libor or TIIE plus 250bp, while the 5-year offers 300bp over. The club of lenders, made up of Bank of America, BBVA, Citi, ING, HSBC and Santander, are apparently requesting pro-rata participation on the two tranches. They are heard to be offering tickets of $212.5m that pay up front fees of 150bp for the 3-year and 175bp for the 5-year portions. Participants may lend in either MXP or USD, according to a banker close to the deal. People close to the transaction say they are pleased with the way things have gone so far with the MLA stage. “Bimbo is a top of the line company,” says a lender away from the deal. Elsewhere, the LatAm bank market is relatively busy for early January. Ternium is out with a $350m via Citi and Calyon, while miners Mirabella and Milpo are expected to reignite syndication efforts to try and close their respective transactions, launched last year. Cemex is meanwhile wrapping up a jumbo refinance.
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Peru Files Bond Shelf
Peru has registered a shelf with the SEC to sell up to $5bn in debt securities. The document does not give any indication of when a first issue might come. After undertaking a non-deal road show in December and January with JPMorgan and Goldman Sachs, many in the market had thought a benchmark-size issue would follow recent benchmark issues from Mexico, Brazil, and Colombia. Peru’s finance minister has communicated that there is demand for at least $600m in dollar bonds, the amount bankers not on the roadshow expect the sovereign to target. In October, Peru was contemplating a 30-year cross-border bond issue of $400m-$600m, its first international foray since a $1.2bn sale of 6.55% 2037 bonds in March 2007 via Deutsche and Citi. DCM specialists say it will be lucky to get anywhere near 30 years in this market for size.
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LatAm FX to Outperform Other EM
Merrill Lynch says it expects LatAm currencies to outperform those of Asia and the EMEA in the first half of 2009 as “a good portion of LatAm corporates already cleaned their derivatives positions.” This, says the shop, should help the BRL and MXP. However, it warns that the CLP and PES, which are highly dependent on commodities, could underperform compared to other LatAm currencies, but for now has positive expectations. The BRL is expected to strengthen to BRL2.05 by June, the peso to MXP12.00, the CLP to 620 and the PES to 3.00. On January 8, the BRL stood at 2.26, the MXP at 13.65, the CLP at 627 and the PES at 3.17. By the end of 2009, the shop expects the positive trend to continue. By then, Merrill sees the BRL at 1.90, the MXP at 11.50, the CLP at 580 and the PES at 2.95.
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LatAm Seen Outperforming Global Growth
While economists agree that GDP growth in LatAm will slow down significantly, it may still fare better than the world as a whole. A report from Peru’s Banco de Credito notes that while it expects LatAm growth to slip to 2.2% in 2009 from 4.4% in 2008, the global economy will grow only 1.6% in 2009, down from 2.8% in 2008. “It could be said that the panorama for 2009 still looks quite manageable. However, depending on the magnitude of the international crisis, performance for the following years is still hard to predict,” says the bank. Citi’s forecasts are not as optimistic as BCP’s. Citi predicts global growth in 2009 of 0.5% and 1.6% in LatAm.
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Mexico Sees Zero Expansion
Mexico’s finance secretary Agustin Carstens says Mexico will likely not grow in 2009, adding that if the US government implements a strong enough stimulus package, it could expand slightly. His prediction is similar to that of several shops. Credit Suisse expects GDP to rise just 0.6%, Merrill Lynch predicts 0.4% and JPMorgan sees no growth at all. Since 80% of Mexican auto industry exports go to the US, Merrill expects the slowdown in the US to hurt consumer spending, dent employment levels, cause a drop in real wages and a decrease in worker remittances. Credit Suisse says Mexico’s industrial output will contract by 2.2% in 2009, compared to a fall of 0.3% in 2008.
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Peru Keeps Rates Steady
As expected, Peru has kept rates unchanged at 6.5%. Analysts had expected the move since inflation continues to be high at 6.65%, down only slightly from its November peak of 6.75%.
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Fitch Sees Colombia Exposed to Venezuela
Fitch sees risk in Colombia’s considerable trade exposure to Venezuela and its vulnerability to external shocks due to limited trade integration and high commodity dependence. It also notes comparatively high fiscal and external solvency ratios. The sovereign’s creditworthiness is supported by a record of macroeconomic stability, disciplined fiscal policies and deft liability management, it adds. However, Fitch gives a BB+ rating to Colombia’s $1bn 2019 bond, lower than other agencies. Moody’s rates the bonds Ba1 and S&P gives them a BBB minus.