The US and Peru have signed a debt-for-nature agreement totaling more than $25m in which the US will reduce Peru’s debt payments in exchange for protecting the latter’s tropical forests. This agreement with Peru was made possible by the Tropical Forest Conservation Act of 1998. It will complement an existing TFCA debt-for-nature program in Peru dating from 2002, a 1997 debt swap under the Enterprise for the Americas Initiative, and the US-Peru Trade Promotion Agreement, which includes a number of forest protection provisions. With this agreement, Peru will be the largest beneficiary under the Tropical Forest Conservation Act, with more than $35m generated for conservation. Other countries in LatAm to have benefited from this plan are Belize, Colombia, Costa Rica, El Salvador, Guatemala, Panama and Paraguay.
Category: Regions
Confusion Prevails over Namisa Valuation
Analysts are at odds over the valuation implications of CSN’s sale of a 40% stake in Namisa to a Japanese consortium for $3.12bn. Mining specialists say it is difficult to identify the price in dollars per ton of iron ore. Analysts at local shops offer a range of implied per ton values from the deal – from $195 to $230 – all of which are subject to change, since CSN will only unveil details, i.e. which assets are included – this coming week. “It’s expensive,” says Banco Brascan mining analyst Rodrigo Ferraz, who calculates the deal went for $195 per ton, higher than what ArcelorMittal paid for London Mining’s Brazil assets earlier this year, and Anglo American paid for a stake in MMX. Mittal paid some $176 per ton for London Mining’s assets, according to Bradesco. Itau’s estimate for Namisa stood at around $6.8bn, which makes the $7.8bn paid look like a good deal for CSN. Hallgarten’s Christopher Ecclestone notes the large consortium’s move on Namisa is a way to increase bargaining power in annual iron ore price negotiations. Assuming they are interested in holding the stake for several years, they might have looked to pay up now to secure a proprietary source of ore and reduce dependence on other exporters like Vale, he adds.
Aureos Closes Colombia PE Fund
Private equity firm Aureos Capital has reached the first closing of a $35.8m Colombian fund. Investors include three Colombian pension funds and an insurance company. The new fund will target investments of $2m-$10m in small to mid-cap businesses in Mexico, Central America, Colombia and Peru. It will invest in parallel with Aureos’ other LatAm funds, which total $140m.
CSN Mum on Namisa Sale
CSN executives say they are not ready to unveil any news regarding the potential sale of its Namisa iron ore mining unit. A Japanese daily reports that a consortium led by Nippon Steel and Itochu are set to acquire a 40% stake in the project for JPY400bn, which would value the asset at around $10bn. CSN executives would not comment on the story, saying they are not ready to discuss the deal. CFO Otavio Lazcano was heard in New York earlier this month seeking to close a sale and was rumored to be in talks with the Japanese consortium, though people close to the company speculate that talks with other groups also took place. CSN hired Goldman Sachs to advise on the sale of the unit, whose value is estimated at $5.0bn-$8.5bn according to analysts and bankers away from the process.
Soriana Rebuffs Moody’s Downgrade
Mexico’s Soriana responded to a lowering of its rating to Ba1 from Baa2 by Moody’s by stating plans to make an MXP800m payment on short-term debt due Thursday. It also says that it successfully placed CP last week below the TIIE rate (8.66% Tuesday), and does not have FX-linked derivative positions. Moody’s cut Soriana amid fears about an aggressive liquidity profile caused by a shift towards CP issuance in recent months.
Mexico Airport Experiences Delays
Mexico’s government is waiting until at least the first half of 2009 to open the bidding process on the Maya Riviera Airport. It had expected to tender the project, which could cost $200m, before the end of this year. The news follows a delay on the bidding for the Punta Colonet port project and other major bids, as the Calderon infrastructure agenda suffers due to the international liquidity crisis.
Investors Sniff Equity Buys
LatAm stocks remain volatile and likely to overshoot further on the downside amid panicked and technical global equity trade, continued in Asia Thursday. But some investors say the region’s main indices, including the Bovespa, are nearing bottom and they are taking the opportunity to buy into stocks that look undervalued. “Today there were good buying opportunities,” says a New York-based hedge fund manager focused on LatAm, who asks not to be identified. He adds that he is buying Brazilian banks, consumer goods companies and telecoms, including Telmex and America Movil. “Going forward, the most liquid stocks like Vale and Petrobras are going to be the focus. These will come back a lot in the next several sessions,” the buyer predicts. While he likes big liquid names, the investor adds that he is less sanguine about pure commodity plays, since the outlook for prices appears to be deteriorating. “It’s difficult to know where the Bovespa will end the year, but I’d venture it will be much close to 50,000 than 35,000,” Ronaldo Patah, head of equity and hedge fund strategies at Unibanco Asset Management, with BRL60bn under management, tells LatinFinance. He adds that he does not see how the country’s main index could fall much lower than current levels. The Bovespa closed at 36,833 yesterday, a new low. In the rout, investors resorted to cash rich companies and sectors like telecom, logistics and power companies, he notes. Among the best performers in Brazil were Telemar and Brasil Telecom, up 3.5% and 0.6% respectively. Most buysiders will be waiting for stability, particularly in developed world markets, before jumping in for size.
Cemex Heads Close to Junk
Cemex – not long ago the bluest of Mexico’s industrial blue chips – is running into trouble with debt refinancing, according to S&P. The agency revised downward its ratings on Cemex’s long-term credit and senior unsecured debt to BBB minus from BBB, bringing it one notch above junk. Analyst Juan Pablo Becerra projected weaker revenues and cash flow generation in 2009 and a difficulty to further reduce debt through asset sales because of the near-freeze in the credit markets. Becerra also noted the outlook for Cemex is negative, reflecting “the risk of further deterioration in the company’s financial condition due to the weakness in the global economy.” He also said that “a downgrade is likely if Cemex fails to improve its funds from operation-to total net adjusted debt ratio to a low 20% by 2010 and if it is unable to refinance its 2009 maturities well in advance.” After recent news of a $500m mark-to-market loss at Cemex, UBS earlier this week cut the cement giant’s stock to sell from neutral. The shop does not expect the company’s operating outlook to improve until 2010, and forecasts an Ebitda decline in 2009.
Autlan, Bachoco Take Derivatives Hit
Mexico’s Minera Autlan says it is paying off debt and looking to save money to minimize its risk amid the global financial crisis. The company said it will begin paying off $30m in debt starting in January. It expects to be done in three years, it said. Also, the miner said it expects to take a charge of $25m in the fourth quarter as a result of the cancellation of derivative structures. An additional $15m could be charged in the medium to long term, the company said. Autlan added that Ebitda stands at about $180m, which makes the company liquid enough to comply with its commitments. It also said its income is in US dollars, which it said protects the company from the devaluation of the local currency. Autlan recently called off a sale, amid talks that bids for the manganese miner dropped too low for the seller. Elsewhere, Mexican poultry producer Industrias Bachoco says it has lost $50m because of recent worldwide volatility in financial markets. Most of the mark-to-market loss on derivatives positions is spread over the rest of the year and first half of 2009. “Our solid financial structure is allowing us to deal with the present situation and meet all of our financial commitments,” says Cristobal Mondragon, Bachoco’s CEO. The pair follows a rash of similar losses from Mexican corporates including Vitro, Gruma and Posadas. Analysts expect more of the same.
Soriana Suffers for CP
Moody’s has chopped the Mexico’s Organizacion Soriana to Ba1 from Baa2 and kept a negative outlook amid fears about an aggressive liquidity profile caused by a shift towards CP issuance in recent months. The cut to junk affects MXP5.5bn in certificados bursatiles due 2012, MXP4.6bn in certificados bursatiles due 2010 and short-term debt of up to MXP6bn under the company’s MXP15billion certificados bursatiles program. “The downgrade also reflects Moody’s belief that Soriana may continue to maintain material short-term debt throughout 2009, which is contrary to the agency’s original expectations of short-term debt being largely eliminated by late 2008,” says the agency. It adds that uncommitted credit lines from certain relationship banks are not adequate CP backup, since their terms and actual funding remain subject to market conditions and are not legally binding. “The negative ratings outlook reflects the currently difficult and uncertain credit market conditions and the potential challenges these conditions may pose for the company’s liquidity requirements,” says Moody’s. It adds that Soriana maintains a negligible foreign currency exposure in its debt structure. Soriana is Mexico’s second largest food retailer in terms of revenues and one of the largest retail chains in Latin America.