Mexico’s Cemex is paying a significant premium to term out as much as $4.7bn in loans by 1-2 years, following downgrade to junk amid looming nearby debt maturities. The refinance involves bilaterals and part of a 2006 Rinker acquisition facility. Bankers on the deal say the company hopes to close renegotiations by the end of the year, but will likely end up finalizing the process early in 2009, since credit committees are all but closed for calendar 2008. On the $6bn acquisition facility, Cemex is asking lenders to extend maturities for a portion of the B tranche with a value of $1.5bn-$2.0bn until December 2010, from a scheduled end-2009 due date. To get banks to term out 12 months, Cemex will boost total payback including margin and fees to Libor plus 200bp through 2009, and Libor plus 225bp-250bp through 2010, depending on ticket size and currency, from 40bp originally, according to a banker close to the talks. Cemex is also asking bilateral lenders at the holdco level to extend on up to $900m, while bilateral lenders to Cemex Espana are requested to refinance $1.8bn. Two new joint bilateral facilities (JBFs) – one for each borrowing entity – are being created so as to group bilats in a basket that includes different maturities and lenders. Both JBFs mature in February 2011 and carry rates equivalent to Libor plus 200bp-300bp. Most of the loans Cemex raised in 2004-2007 priced well beneath Libor+75bp. In general, the process is gaining positive momentum, though some banks are choosing not to extend and will be demanding timely payback, say people involved the deal. BBVA, Citi, HSBC, RBS and Santander are leading the refinancing.
Category: Regions
S&P Predicts 0%-30% Ecuador Recovery
S&P has cut Ecuador to SD from CCC minus and predicts scant payback for investors still holding sovereign bonds. “The recovery rating on the global 2012s and global 2030s is 6, indicating the expectation for negligible (0%-10%) recovery in the event of a payment default,” says the agency. “The recovery rating on the global 2015s is 5, indicating the expectation for modest (10%-30%) recovery in the event of a payment default,” it adds. The downgrade follows the government’s decision not to pay $30.6m due on $510m in 2012s, which were chopped to D from C. The $650m in global 2015s fell to C from CC, while $2.7bn in global 2030s were unchanged at C. “We do not expect the government to make the next coupon payment of $135m on February 15, 2009, at which time we would revise the rating to D,” says S&P. The default by Ecuador is its second in less than 10 years and the second by a rated sovereign in 2008. S&P revised Seychelles to SD in August. S&P’s assessment is much more gloomy for investors than Fitch, which sees up to 50% payback from the 2015. It chopped the sovereign to RD from CCC, assigning 11%-30% recovery prospects to the 2012s and 2030s, 31%-50% on the 2015 and 51%-70% on pars and discounts. Fitch sees a bigger loss on the 2012s and 2030s since the government deems them “illegal” and “illegitimate.”
Peru Meets Investors, Plans Second Tour
Peru is meeting investors on a non-deal roadshow in the US and Europe that precedes a Middle East and Asia tour scheduled to take place in January, a government source tells LatinFinance. The first round of meetings started last Wednesday and wrap up this Thursday. Besides finance minister Luis Valdivieso and central bank president Julio Velarde, investors in New York, Boston and London were also set to meet executives from BCP, Buenaventura and Grana y Montero. Bankers not running the meetings expect it to lead to an early 2009 sovereign bond issue attempt. JPMorgan and Goldman Sachs are behind the tour, and $600m is the targeted new cash raising, say bankers not involved. “This is a non-deal roadshow, we are not discussing any specific transaction,” says the government source. In October, Peru was contemplating a 30-year cross-border bond issue of $400m-$600m, the sovereign’s first international foray since a $1.2bn offering 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. Investors are waiting for stability before buying and their extreme caution would have significant impact on tenor and spread. Peru has yet to name a new public credit executive director, following the late November resignation of Pablo Secada. The next most senior official in the department is Betty Sotelo Bazan, general director of the national department of public indebtedness. Meanwhile, the IMF late last week put out a bullish report on Peru following a visit to Lima. “The Peruvian economy is expected to be among the fastest growing economies in the world in 2009, with real GDP growth projected at 6%,” says the Fund. “With global price disinflation already underway, inflation should decelerate below 3% by end-2009,” it adds.
Titularizadora Colombiana Readies MBS
Colombian securitization shop Titularizadora Colombiana will Wednesday start selling some COP390bn ($178m) in 10-year notes backed by mortgages issued by BBVA, BCSC, Bancolombia and Davivienda. The TIPS Pesos E-9 issuance will be denominated in COP and have a fixed rate. An auction will be held to determine a minimum price. Titularizadora last closed a sale of 2018 2.2-year average life MBS December 4. The notes were priced with a coupon of 5.99%.
Cemex Looks to Wrap up Loan Talks
Mexican cement maker Cemex will this week look to wrap up negotiations with banks to extend its 2009 and 2010 loan maturities by 12-24 months, say people involved in the process. The talks surround close to $10bn in bank debt and covenants, margins and terms and conditions are all being renegotiated. The talks, which have been going on for a good part of a month between the company and five lead banks – BBVA, Citi, HSBC, RBS and Santander – are aimed giving Cemex breathing room to restructure its operations and balance sheet. Tenors on up to 4 syndicated or club facilities are being extended, while terms on 2 more bilateral loans are also being renegotiated. In 2009 alone, Cemex faces $6bn in maturing bank debt, which accounts for 43% of its total outstanding debt, a person close to the talks told LatinFinance in mid-November. Cemex has recently been downgraded by Fitch to BB+.
Inflation Down in DR and Guatemala
The Dominican Republic and Guatemala are seeing lower inflation rates, says JPMorgan. The DR’s monthly inflation dropped by 3.3% in November, taking the annual rate to 7.2%, down from 12.8% in October. “We expect positive base effects, lower commodity prices and a decline in domestic demand to ease consumer price pressures and help bring down headline inflation, which is already at its lowest point since October 2007, to around 6% by year-end and keep it between 6-7% in 2009,” the shop says. Guatemala, while not having seen inflation drop in 2008, should see it decline to 7.5% in 2009 from about 9.8% in 2008.
Panama Canal Locks in Multilateral Cash
In the face of a credit crunch that has derailed financing plans for numerous projects throughout the region, the Panama Canal Authority has obtained $2.3bn in financing from multilateral banks to expand the waterway. JBIC is providing $800m, the European Investment Bank $500m, the IDB $400m, and CAF and the IFC are each providing $300m. The financing carries a 20-year maturity with a 10-year amortization and a 10-year grace period during which only interest will be paid, says Cynthia Urda Kassis, a partner at Shearman & Sterling, the Authority’s legal advisor. Pricing varies between agencies and floats over Libor, she says, declining to provide further details. Kassis notes the PCA began evaluating financing options more than a year ago and that it had considered commercial banks, but ultimately chose multilaterals. She says that the expansion project has relatively low leverage, as the total investment to be made on the project is $5.25bn. Mizhuo is the Authority’s exclusive financial advisor.
Office Depot Mexico to Invest $50m in Colombia
Office Depot Mexico (ODM), a joint venture between Grupo Gigante and Office Depot, will invest about $50m over a 5-year period to enter and expand in Colombia, Sergio Montero, a spokesman for Gigante, tells LatinFinance. Montero says that expansions will be financed using cash on hand and that while it is preferable for ODM to grow organically in Colombia, potential acquisitions might be considered. He also says that no financial advisor is on board at the moment. The company plans to open its first store in Colombia in late 2009, Montero adds. ODM also plans to next year open 10-20 stores in Mexico and possibly CentAm, versus almost 30 stores opened in the region so far this year.
Gigante Keeps 50% Office Depot Stake
Mexico’s Grupo Gigante says in a letter to the BMV that it has agreed to keep its stake in Office Depot Mexico unchanged at 50%. The retail conglomerate had been trying to purchase the 50% that Florida-based Office Depot owns. Gigante had offered to acquire the remainder of the company, but the $430m offer was rejected in October. Gigante also says Office Depot Mexico will expand to Colombia using its own resources and not those of the stakeholders.
S&P Gives Telmex Program AAA
S&P has rated AAA on a local scale the MXP10bn 5-year local bond shelf from Telmex Internacional, which it says will be used primarily to refinance debt. The agency also affirms the issuer’s BBB+ global rating with a stable outlook, noting ample cashflow and a manageable maturity schedule. S&P says Telmex uses forwards and swaps to minimize currency and interest rate risk, but says the company has not reported any related negative impact. Inbursa is managing the program. After being spun off in a $16bn transaction in June, Telmex Internacional was expected to translate its large cash position into acquisition activity and aggressive organic growth in markets such as Argentina, Chile and Brazil. The local program was filed in early November.