Fitch has downgraded to C from CCC minus the $100m 11.25% perpetual subordinated step-up notes issued by Mexican mortgage company Metrofinanciera. The action follows the deferral of a $2.8m coupon payment due Tuesday. The coupons of the perpetual bonds are deferrable when Metrofinanciera’s risk-weighted capital ratio stands below 8%. Such an action is not considered a default at the company level, Fitch says, leaving it to affirm Metrofinanciera’s B+ global and BBB national scale ratings. The recovery rating on the perpetual bonds remains at 6, the agency’s lowest. “Recovery expectations are limited in view of the subordinated nature of this issue and the uncertainty over the foreseeable future on Metrofinanciera’s ability to improve its financial condition while reducing its reliance on external support,” Fitch says.
Category: Regions
Pichincha Says Well Positioned for Crisis
Ecuador’s biggest bank, Pichincha, is suffering the double punch of external and internal crisis, but it claims to be well positioned to survive. “Right now we are being prudent and waiting,” Antonio Acosta Espinosa, co-president at Pichincha tells LatinFinance. “The world has changed very quickly . . . but we don’t anticipate a situation in which financing lines to Pichincha are reduced.” However, the official notes a sudden decrease in trade financing providers. “Now we’re talking to 5-6 banks. Before we spoke to 50,” says the banker. “We see a huge concentration.” He adds that Pichincha has lived through many crises in its 100-year plus history and learned to be prudent and flexible to survive. “The policy of Pichincha is to focus on safeguarding liquidity . . . and then to develop products that will fit the circumstances,” Espinosa. He cites as an example 1-2 year products to serve clients worried about the government abandoning dollarization. And while the veteran banker views political crisis in his country as chronic, he does expect the government to make good on a bond coupon payment missed over the weekend. “We don’t expect a default,” says Espinosa. “We see a political strategy for this, but we don’t expect [default] to become a reality. I’m sure they will pay.” The sovereign is in a 30-day grace period. Espinosa adds that soaring sovereign risk spreads have impacted local capital markets, keeping investors at bay. He expects volatility to last at least another 6 months. “It’s a tough time to be planning new business lines like capital markets,” says Espinosa. Nonetheless, the bank sounds optimistic about its future. “The bank’s liquidity is very high,” says Espinosa, speaking in Panama City, where he was attending Felaban meetings.
Ecopetrol Downgraded to Hold
Colombian investment firm Bolsa y Renta has downgraded Ecopetrol to hold from buy, citing lower than expected oil prices. Analyst Mauricio Restrepo says that although Ecopetrol’s revenues were COP26.6bn at the end of September, 73.2% higher than during the same period in 2007, it expects net profit to decline in 2009. The firm expects Ecopetrol’s net profit to be COP10.8bn in 2008 and COP6.9bn in 2009. Ecopetrol has a market cap of COP81bn.
S&P Sees Guatemala Slowdown
S&P says it has revised its outlook rating for Guatemala to stable from positive. “We revised the outlook to stable to reflect the slowdown of the encouraging momentum seen in both Guatemala’s tax collections and GDP growth in the last two years,” explains S&P credit analyst Roberto Sifon Arevalo. He also notes he expects tax revenues as a percentage of GDP to be about 11.7% in 2008, lower than in prior years and likely remaining low in 2009. S&P also cut its GDP growth forecast for 2008 and 2009 to 3.8% and 3.5%, respectively. In addition, the agency affirmed its BB/B foreign currency and BB+/B local currency sovereign credit ratings and its BBB minus transfer and convertibility assessment on the country.
Mexico’s Salinas Ups Stake in Circuit City
In the past few days, Mexican billionaire Ricardo Salinas has been buying up shares in bankrupt electronics retailer Circuit City, accumulating a stake of around 28%. Filings with the Securities and Exchange Commission show that on November 12, Salinas purchased 5.3m shares at $0.22 each. The next day, the owner of Grupo Elektra and Grupo Salinas as well as television stations and cell phone companies, bought 18.8m shares at $0.24 each and on November 14, he purchased another 5.2m shares at $0.26 each. Circuit City closed at 20 cents Tuesday, down 2 cents on the day. The Richmond-based company has a market cap of $34m.
Roque Leaves Mexico Mining Post
Norberto Roque, Mexico’s mining coordinator, left his post this week to pursue a new job at the National Institute of Statistics and Geography (Inegi). An Inegi press release confirms Roque’s new post as general director of federative relations based in Aguascalientes. Mining executives familiar with the move do not know if a replacement for Roque has been selected or if one will be chosen in the near future. This is worrisome, as the mining industry faces falling commodity prices globally, say an executive. The office of Mexico’s mining coordinator did not return calls for comment. In a September interview with LatinFinance, Roque said Mexico is in a race against time because pricing for mines is right at the moment. He also discussed plans to raise capital through novel securitization structures for the industry in 2009. “We have a great commitment to maintain Mexico as the number one place to do mining,” noted Roque.
Barclays Closes Out Ecuador, Vene Positions
Barclays is advising investors close out positions on Ecuador and Venezuela after the former announced it will use a 30-day grace period to decide whether to pay a $30m coupon on its 2012 global bonds, due November 15. The shop says although Venezuela has strong fundamentals, it may be affected by the headline risk related to Ecuador, falling oil prices and a challenging environment for sovereign credit globally. Ecuador’s announcement last week led ratings agencies to downgrade the sovereign. S&P, which cut its rating to CCC minus from B minus, says “the combination of sharply lower oil prices and an expected hit to economic growth resulting from lower exports and remittances is expected to pressure fiscal accounts in 2009. However, willingness, not capacity, to pay is currently the overwhelming credit weakness.” Moody’s, meanwhile, slashed Ecuador’s sovereign rating to Caa1 from B3.
JPMorgan to Offer Mexico Registered ETFs
JPMorgan will offer selected US-registered ETFs on the Mexican bolsa’s international segment. The bank says this will enable all eligible Mexican bolsa participants to achieve exposure internationally while benefiting from a MXP-denominated security. The cross-listed ETFs will be traded on the Mexican bolsa in pesos through a local broker, the bank says. JPMorgan will service the ETFs and handle all corporate actions. It will also disseminate relevant shareholder and corporate actions information in the Mexican market on the Bolsa.
Fitch Cuts Sare
Fitch has cut its rating for Mexican homebuilder Sare to BBB+ from A minus, noting that operating and financial indicators have weakened in recent quarters. “The rating is limited by the company’s dependence on the availability of financing to sell its homes, as well as the high working capital requirements associated with the company’s normal operations,” the agency states. Sare has postponed new apartment-building projects to focus on low-income homes that have a shorter working capital cycle and are also eligible for government-sponsored mortgages. Fitch also put the rating on watch negative.
LatAm Banks Seen Prepared For Challenge
The external environment continues to get worse, but LatAm banks gathered in Panama City for Felaban meetings over the weekend remain optimistic about their prospects. “We have not been impacted at all by the financial crisis,” Roopnarine Oumade Singh, general manager, treasury at Trinidad’s Republic Bank, tells LatinFinance. “We don’t expect to have any impact on the financial side. I guess the impact is going to come from the real side, as the world economy slows down,” Singh adds. He and other senior retail bank executives boast a strong liquidity position and say they are well placed to survive the global slump. A Moody’s report on the effect of the global financial downturn on LatAm banks forecasts that although they face challenges, they are well prepared to weather the storm. Moody’s assumes fundamental credit conditions in LatAm banking systems for the next 12-18 months are negative, predicated on a scenario of potential global stagnation and deleveraging. However, the agency also points out that financial institutions are relatively well placed, and that many could prove resilient amid today’s turbulence, particularly because many have limited exposure to troubled offshore assets, as well as reduced dependence on foreign currency financing.