Colombia’s central bank kept its benchmark interest rate unchanged at 10% Friday, a move expected by economists. The weakening of the peso against the US dollar, high inflation and the economy’s relative stability throughout the global crisis are all factors that likely led to the decision, according to Citi. The 10% level is a 7-year high for the benchmark repo rate.
Category: Regions
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Mexico State Gets MXP500m Loan
The state of Mexico has signed a MXP500m 15-year loan with Banorte. The loan is a direct obligation of the state payable through the trust to which the state of Mexico has pledged the rights to 100% of its federal participation revenues and to 25% of its revenues a government fund to support state governments. Moody’s rates the facility Baa3. Banorte declines to disclose the spread over TIIE.
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Vitro’s Cracks Get Bigger
Mexican Glassmaker Vitro is edging closer to becoming the next Mexican distressed story, following the decline of CCM and paper producer Durango. As its 8.625% 2012 and 9.125% 2017 bonds trade at the 25-26 level, according to Credit Suisse, Moody’s and Fitch have placed their B2/B ratings on review for downgrade, and JPMorgan says it expects Vitro to seek protection. “We see the company more than likely seeking protection from creditors under the Mexican Reorganization Act,” JPMorgan says, seeing a recovery rate between 20%-30% on the company’s 2012, 2013, and 2017 bonds. The shop does, however, move its rating to marketweight from underweight, based on current market prices relative to base case recovery estimates. “The rating actions reflect increased pressure on Vitro’s liquidity and financial flexibility following the company’s recent announcement of a $227m marked-to-market loss on its derivative instruments,” Fitch says of its ratings move, adding that unwinding the positions should increase leverage. The action also reflects the current volatility in the financial and credit markets, as well as a more challenging operating environment due to lower economic growth prospects in Mexico and other regions where Vitro has a presence. It was facing $123m in amortizations this year as of mid-year, with $28m due in 2009. Vitro said this week that it continues to negotiate with creditors, and has announced expenditure reductions in an effort to maintain liquidity. It may provide more information about the negotiations when announcing earnings on Tuesday.
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Jamaica Debt Problems Worsen: JPM
Jamaican bond yields are shooting up at a moment when the government is facing large maturities and a challenging external borrowing environment, says JPMorgan. The government auctioned JMD800m in 3- and 6-month treasury bonds this week at average yields of 15.21% and 16.96%, respectively, or 40bp and 161bp higher than its September auction. The average yields were 16bp and 161bp higher than those offered on comparable Bank of Jamaica CDs suggesting expectations of higher interest rates in the near term, says the shop. That 3-month treasuries were oversubscribed by 150% while the 6-month bills were undersubscribed by 1% indicate clear investor preference for shorter-dated bills. Rising yields in the domestic debt market are worrying, as they come at a time when the government has to increasingly rely on the domestic market for its financing needs. Jamaica faces a February 2009 maturity of a EUR200m 10.5% bond, and is also hammering out some $600m in loans from the IDB, which could add up to as much as $1bn over 5 years.
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Moody’s Lowers Maxcom Outlook
Moody’s has lowered the outlook on Maxcom’s B3 rating to stable from positive. The move was prompted by the likelihood of a weakening of the Mexican telecom’s business and revenue growth through 2009, explains the agency. That would extend the period in which the company could reverse its negative free cash flow generation. While Mexico’s large unmet demand for telecom services helps Maxcom’s prospects, lower purchasing power in its target markets and weaker economic conditions contribute to a slower growth outlook.
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Analysts Smile on Namisa Sale
Mining analysts applaud CSN’s sale of a 40% stake in its integrated iron ore mining complex Namisa to a Japanese-led consortium. The $3.12bn deal values all of Namisa, which can produce 38m tons of iron ore, at $7.8bn. That also implies that the 40m-50m tons that will be produced at Casa de Pedra, CSN’s main iron ore asset, are worth $8.2bn, bringing the total value CSN’s iron assets to $16.0bn, according to UBS Pactual. “We think CSN created value for shareholders,” notes the shop, adding that $16.0bn is double CSN’s current market cap. Itau’s Marcelo Brisac says the sale came at a premium to recent iron ore asset sales in Brazil. In a report he notes Namisa’s enterprise value per ton is $174, which excludes the asset’s main port, its stake in logistics unit MRS, as well as capex required to meet terms of the sale. UBS’s estimate of Namisa’s EV/ton is $205, but the calculation does not exclude those items. Usiminas’ purchase of J.Mendes in February came at $98 per ton, while London Mining’s August sale to Arcelor went for $151, calculates Brisac, noting those two were done under much more favorable market conditions. While the transaction seems to reaffirm many analysts’ previous valuations of CSN, the fact that it converts part of this valuation – $3bn, to be exact – into cash bolsters the company’s case for a higher stock price – a plea it has made repeatedly in recent years. Itau says its fair value estimate for the company is not changed by the deal and maintains its underperform recommendation for the stock with a 2009 year-end target of BRL62.00. CSN shares closed at BRL26.00 Thursday, down 1.7%.
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Scotia Securitizes Mexican Road Credits
Scotiabank’s Mexican unit has priced MXP4.29bn in 2012 bonds backed by loans to a road package belonging to the Fonadin infrastructure fund, at a fixed rate of 8.35%. The AAA rated notes feature a guarantee from the Mexican government and were placed with a broad group of institutional investors, according to bankers on the deal. The loans were made to a package of four roads – Cuernavaca-Acapulco, Cordoba-Veracruz, Leon-Aguascalientes and La Tinaja-Acayucan – held by the Fonadin trust (previously known as Farac) in the late 1990s. Scotia’s capital markets unit managed the sale.
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Brysam Global Acquires Stake in BCSC
Brysam Global Partners has acquired an 18.8% stake in Colombian bank BSCS for $98m, the latter said. BSCS is Colombia’s eighth largest bank and has a 4% market share in terms of assets, which surpass COP6bn. Brysam is a private equity fund that focuses on emerging markets and mainly handles cash for JPMorgan. Neither party disclosed the names of the advisors involved.
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WBank Approves Guatemala, Colombia Loans
The World Bank has approved a $200m loan for Guatemala and a $30m loan for Colombia. The Guatemala loan has a maturity of 26.5 years and a grace period of 8.5 years. It also has a front-end fee of 0.25% of the total loan amount. The loan, the first of three development policy loans that the World Bank is extending to the country, will support fiscal and institutional policies to improve economic growth and maintain fiscal stability. The Colombia loan, with a maturity of 10 years and a grace period of 5 years, will provide funds to improve Bogota’s integrated massive transit system, including the subway.
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Vitro Continues Creditor Talks
Mexico’s Vitro says it is still in discussions with creditors to consider options for meeting its debt obligations during a volatile period in capital markets. Last week, the glassmaker said its derivative contracts had a negative position of $227m, including $33m in FX and interest rate derivatives. As of Q2, Vitro was facing $123m in amortizations this year, with $28m due in 2009. Its outstanding debt is about $11.35bn.