The planned issuance of up to MXP5.7bn in 2-year bonds by Cemex as part of a liability management exercise highlights the constraints on Mexican duration faced even by its blue chips. The domestic market, virtually shut since September, may be creeping open. But issuers will have to rely on shorter-term debt – in some cases a year or less – for some time. “Next year is going to be very tough,” Tonatiuh Rodriguez, who oversees about MXP40bn at pension fund Afore XXI, tells LatinFinance. “I expect the long-tenor issue market will reopen in the second half or in the last quarter of 2009.” Short-term issuance will dominate the first half, and a return to the 20-year and 30-year local tenors of the past may be years away, Rodriguez says, with issuers getting 10 years at most when the market revives. Though his and other Afores are not normally short-term debt buyers, Rodriguez explains they do have an interest in providing liquidity by participating in short-term funding to companies, especially for names whose longer bonds they hold. To fulfill long-term needs early next year, he says Afores can look to infrastructure offerings coming from the Fonadin fund and other federal and state government programs.
Category: Regions
Cemex Tackles Loan Hump
Mexico-based cement multinational Cemex is renegotiating terms on some $10bn in bank debt in an effort to relieve pressure building for 2009. Covenants and pricing are being revised for 6 facilities, and margins are likely to jump by up to 150bp, in some cases to the 200bp over Libor area, estimates a banker close to the process. BBVA, Citi, HSBC, RBS and Santander are leading the rescheduling. The company, which suffers exposure to housing and construction, has seen Ebitda fall, forcing up leverage ratios. Cemex earlier this month lost its investment grade rating from Fitch, which cut to BB+, and has some $6bn in loans due in 2009, or roughly 43% of total outstanding debt, says an executive familiar with the firm. Cemex’s bank debt due in 2009 and 2010 is being termed out by 12-24 months, depending on the facility. Fees will be paid up front to participants, say bankers. Tenors on up to 4 syndicated or club facilities are being extended, while terms on 2 more bilateral loans are also being renegotiated. That does not include the liquidity premium banks have imposed to compensate for higher funding costs. The renegotiation is aimed at buying time to restructure the Cemex balance sheet, sell assets and tackle other parts of the capital structure. Cemex apparently wants to wrap up the process by year-end in an effort to begin 2009 with breathing room to address other concerns. A banker who attended a recent meeting with the cement giant says the firm is being very transparent, but that lenders have little choice but to agree terms. The main bank group is too exposed to let Cemex fail, adds the banker.
Colombia to Boost Local Debt Sales
Colombia plans to sell an additional COP2trn ($860m) of TES bonds before the end of the year, says the finance ministry. The government will place 2011, 2013 and 2018 fixed-rate bonds and 2013 and 2023 bonds linked to the UVR inflation rate. The funds will go toward pre-financing 2009. The government also indicates that the issuance plan for 2009 will be reduced by about $900m, plus an additional $220m from lower debt amortizations next year – through recent liability management operations – so that the new budget plan for next year is about $9.5bn of TES, from a previous $10.6bn. “Given that we see clear upside risks to the official fiscal deficit forecast for 2009, our assessment is that the government is pre-financing next year’s borrowing requirements taking into account the risk of eventually being forced to issue more than suggested by current official plans,” JPMorgan says in a report.
Barclays Shaves Colombia Growth Forecast
Barclays lowered its expectations for growth in Colombia to 3.0% in 2008 and 1.5% in 2009, down from a previous estimate of 3.4% and 3.0%. “While the real economy started to adjust in the first quarter of 2008, lowering the need for an abrupt correction in the coming quarters, we expect it to take a further hit from the recent intensification of global shocks,” the shop says. The bank also expects current account deficits to be wider than previously thought and revised its deficit forecasts to 2.8% of GDP in 2008 and 3.9% in 2009, up from previous estimates of 1.9% and 2.5%.
Fitch Positive on BCP
Fitch has revised the outlook on Banco de Credito de Peru to positive from stable and affirmed its IDR ratings. It also upgraded its individual rating. Fitch says BCP’s ratings reflect its “dominant franchise, important market share across all segments, broad, low cost deposit base, diversified loan portfolio, improved asset quality and adequate reserve coverage. BCP’s systemic importance, improving efficiency and the depth and breadth of its management also support its ratings.” Fitch affirmed BCP’s foreign and local long-term currency IDR ratings at BBB minus, its foreign and local short-term currency ratings at F3.
Panama Canal Locks in Funds
The IFC has approved a $300m 20-year loan to the Panama Canal Authority’s (PCA) expansion project. The PCA said in October that it would borrow $2.3bn from 5 multilaterals, clinching the funds as other infrastructure projects in the region see delays. “Multilaterals are very liquid, and they can play a role in making sure infrastructure financing doesn’t completely disappear this year or next year,” Vincent Gouarne, the IFC’s director for subnational finance, tells LatinFinance. “They will have to be selective. This [financing] is very significant, signaling that a project of this quality should happen come hell or high water.” Gouarne says the project is the most solid the IFC has seen in a long while. Despite a possible drop in shipping traffic next year, he says it is robust in terms of starting the project without leverage and with significant cash reserves. “We specifically erred on the side of providing longer tenor than necessary, so they have flexibility,” Gouarne says. He also notes the contingencies factored into the potential cost overrun were based on commodities prices being much higher than they are now. Gouarne did not disclose the rate on the IFC’s loan, but PCA CEO Alberto Aleman said in October that it will pay an average effective interest of 5.48%, with spreads over Libor on the different loans in the package of 48bp-120bp, stepping up to 140bp. The $2.3bn package has a 10-year grace period and breaks down into $800m from JBIC, $500m from the EIB, $400m from the IDB and $300m each from the IFC and CAF. Mizuho is financial advisor to the PCA.
Capital Gold in Talks to Acquire Juniors
Capital Gold executive vice president Jeff Pritchard tells LatinFinance that his company is in informal talks with about 10 junior mining exploration companies in Mexico. Although he cannot say for sure if Capital Gold will end up making an offer for any of them, the company is interested in buying exploration outfits whose projects can go to production in 2 years. On the other hand, Pritchard also confirms that Capital Gold has been approached by larger mining companies interested in acquiring it as a bolt-on acquisition to beef up operations in northern Mexico. However, given volatility in the company’s share price, Pritchard would rather wait before selling. Capital Gold has a market cap of about $70m. Shares have slid from a 52-week high of 79 cents to 36 cents November 11.
MasterCard Sees LatAm Boost
MasterCard has reported a 15.5% hike in LatAm/Caribbean volume to $48bn equivalent for the third quarter, and sees general improvement across the board. “Despite the challenging times facing the global economy, MasterCard’s Latin America and Caribbean region has once again reported double-digit growth,” says Richard Hartzell, president for LatAm/Caribbean at MasterCard. Purchase volume reached $26bn in Q3, up 18.9% on a local currency basis, including purchase volume plus cash volume and includes the impact of balance transfers and convenience checks. The number of MasterCard-branded cards increased 19.3% as of the end of the third quarter of 2008, totaling 110m cards. “Unlike many other industries, the payments industry, particularly in Latin America, is still in very early stages of maturity and we continue to see a rapid uptake of card-based electronic payments,” says Hartzell. “As the secular shift from paper-based payments to electronic payments evolves we remain focused on delivering value to all parties involved in the payments chain,” he adds.
Cemex Readies MXP5.7bn Swap
Cemex plans to launch a tender offer as soon as today to holders of MXP5.7bn of four issues of its certificados bursatiles. It is offering an UDI or MXP denominated 2011 bond in its place as part of a liability management exercise. The offer period is set to start today or tomorrow, depending on regulatory approval, and last until December 10, or longer if extended. After getting into derivatives trouble and seeing its global credit ratings plummet, the highly-levered cement maker is trying to head off rapidly approaching local maturities. The offer will be extended to holders of its 6.28% and 5.30% UDI-denominated notes maturing December 15, 6.50% UDI-denominated notes maturing January 23 and MXP-denominated bonds paying Cetes plus 0.99% due in April. Participating holders will have their pick of new September 2011 MXP-denominated notes paying a spread over TIIE, or UDI-denominated notes paying a fixed coupon. Each day during the process a floor price for the new notes will be established, until the offer concludes. Cemex did not disclose the initial floor price, though it is expected to be attractive relative to existing coupons. The new notes are rated AA on a national scale. Banamex and BBVA Bancomer are managing the process.
Mexico Hikes Debt Ceiling
As Mexico puts together its borrowing plans for 2009, it has raised the external net indebtedness ceiling to $5bn from $1bn in 2008, to allow for more flexibility in financing through multilaterals. “We incorporated a net indebtedness ceiling of $5bn for next year, thinking of extra activity with the IDB and World Bank. It looks like 2009 will be a year in which this type of financing is going to be very valuable,” Gerardo Rodriguez, Mexico’s director of public credit, tells LatinFinance. Changes to revenue laws allow for the increased flexibility, with the sovereign able to get extra external funding by the lowering the amount it raises domestically, and vice-versa. Rodriguez notes that multilaterals are offering roughly Libor flat. Bankers say a high grade issuer like Mexico could tap, but only at a significant premium. The government has not yet made any firm decisions on 2009 financing. “It is not clear which way the external markets are headed. We just know that the road is going to be very volatile and we want to be flexible and ready to use any of the different financing channels that we have,” Rodriguez says. As for the domestic debt Mexico plans to buy back beginning December 1 as part of a liquidity stimulus plan for the local markets announced in October, Rodriguez says the government will target off-the-run bonds between 10 and 30-years. Separately, Mexico has spent $1.5bn on oil hedges in the first three quarters of 2008, according to a report from Credit Suisse, up from $652m in all of 2007. “The existence of the hedges reduces the likelihood that the government will have to cut spending if oil prices stay below the budget assumption of a price of $70,” the shop says.