Ivanhoe Energy Ecuador recently signed a contract with state-owned companies Petroecuador and Petroproduccion to develop the Pungarayacu field. Ivanhoe says capital requirements will be about $20m during the first year and a total of $110m for the first 3years of appraisal. Ivanhoe also says that international oil companies have expressed interest in participating in the project. It does not name them, but some of the international players in Ecuador are Sinopec and CNPC from China, AGIP from Italy, Brazil’s Petrobras and Repsol YPF from Spain. According to Petroproduccion’s studies, the Pungarayacu field is estimated to have 4.5bn-7.0bn barrels of oil in place. Preliminary engineering estimates would support output above 100,000 barrels a day, Ivanhoe says. Ecuador produces about 500,000 barrels of oil per day, of which Petroproduccion pumps 170,000.
Category: Regions
More Mexican Corporates Suffer Derivs Losses
Rating agencies have downgraded Mexico’s Gruma and Posadas amid derivatives related losses. A rating agency official tells LatinFinance that this may just be the tip of the iceberg, as analysts work overtime to reassess Mexico’s corporate balance sheet. Tortilla maker Gruma was demoted BBB minus to BB+ and BB, respectively, by both Fitch and S&P, including its $300m perpetual. Both agencies also assigned a negative outlook after Gruma has reported a $684m mark-to-market loss. “Derivative positions expose Gruma to large potential losses over time as these instruments roll-off during the next three years,” says Fitch. Gruma has approximately $140m in cash and committed credit facilities, and no significant maturities until July 2010, it adds. At June 30, total on-balance-sheet debt reached $620m, almost entirely dollar denominated, including the perp, a $150m syndicated credit facility due 2010 and a $40m revolver due 2011.It also has an 8.62% stake in Banorte, valued at approximately $275m, says Fitch. “Further volatility in the currency markets and/or margin calls from counterparties could severely affect the company’s financial profile,” says S&P analyst Enrique Gomez Tagle. Meanwhile, S&P axed hotel operator Grupo Posadas to BB minus (negative) from BB, after a $38m FX swap related loss. “The rating action also reflects the company’s financial policy, which has proven to be more aggressive than we expected,” says S&P analyst Monica Ponce. Other analysts say that corporates in Mexico and Brazil look particularly vulnerable to the crisis.
Vitro Faces Negative Derivatives Position
Mexican glassmaker Vitro says its derivatives instruments have a negative position of $227m. It has complied with the necessary coverage requirements so far, it says, but is “maintaining close communication with counterparties,” to assure continued payment. Vitro added that a $33m portion of its position covering FX and interest rates, have not varied significantly during the last 10 days. Manufacturer Grupo Saltillo announced an MXP600m negative position this week, after retailer CCM saw its ratings chopped on similar liquidity concerns.
Oil Spill Threatens Vene/Ecuador
WTI well below $90 may push current accounts into deficit in both Ecuador and Venezuela in 2009, says JPMorgan. “Assuming that high levels of spending and imports are here to stay, every $10 drop in the annual average for oil leads to a 3.25%-of-GDP increase in Venezuela’s 2009 current account deficit and a 1.5%-of-GDP increase in the fiscal deficit,” says JPMorgan. “For Ecuador, every $10 drop in oil leads to a 2%-of-GDP increase in the current account deficit and a 1.3%-of-GDP increase in the fiscal deficit (net of lower subsidies for fuel imports),” it adds. The shop stays underweight both credits in its model debt portfolio, but prefers Venezuela over Ecuador; to the degree it can be executed. “Selling 1-year Venezuela CDS makes sense given large asset stock and no market amortizations until 2010,” JPMorgan adds. It says that Ecuador’s reliance on oil revenues to finance high spending levels has increased markedly in recent years as oil funds have been brought into the budget. It also has less ability than Venezuela to tap its record high reserves, as well as greater reliance on external financing, mainly multilaterals. Neither government has meaningful short-term market financing needs: Ecuador has total amortizations of 1.5%-of-GDP and no bond amortization until 2012; Venezuela’s total amortizations are only 0.8%-of-GDP next year, with no bond amortization until 2010, says JPMorgan.
COP at Market’s Mercy
The Colombian authorities have exhausted all their resources for keeping the country’s currency from devaluating further, say local analysts. “They’ve done what they can do. Now it’s out of their hands,” says Francisco Chavez, an analyst at Colombian broker Corredores Associados. Last week, Banrep lifted capital restrictions on investments in TES bonds and other local fixed income instruments in an effort to increase the bid for the COP, which has depreciated 25% since August 1. Also last week it lifted the requirement for local borrowers to deposit the equivalent of 50% of any new dollar denominated debt at the central bank to facilitate their access to dollars. And in the last week of August the central bank removed a capital control on foreign investments in local equities. The COP closed Friday at 2,252 per dollar.
Banorte Frets CCM Loans
Mexico’s Banorte acknowledged it has MXP1bn in credit risk exposure to retailer CCM through an unsecured loan that expires in March. The loan represents 0.3% of its total assets and 0.5% of its total loans, it says, and claims it could recover part or all of the loan depending on the outcome of the retailer’s bankruptcy filing. Banorte said it isn’t counterparty to CCM’s derivatives operations, nor to those of Durango or Grupo Industrial Saltillo, with whom it does not have loans. CCM defaulted last week and entered restructuring. The collapse of Mexico’s third biggest supermarket chain follows the recent collapse of Durango.
Gissa to Write Down MXP600m
Mexican manufacturer Grupo Industrial Saltillo expects to register a writedown of a little under MXP600m in Q3 as a result of derivatives losses. Gissa says the mark-to-market-based charge does not represent a cash outflow. The producer of engine parts and iron-based construction products says about half of its sales are in dollars, which also helps to cushion adverse effects of this week’s peso slide. After hedging worries in Brazil last month, concern has now spread to Mexico. Earlier this week, retailer CCM said it was negotiating with creditors related to derivative-based losses. Issuers including Cemex, Urbi, Banco Compartamos, Dine, Sanluis and ICA all moved Thursday to reassure investors they have no FX-based derivatives or precarious dollar-debt positions.
Mexico’s Arca Plans Local Bond
Mexican bottler Embotelladora Arca is planning to issue up to MXP2bn in bonds on the local market. The issuer has filed for up to MXP1bn in 2011 floating-rate notes and up to MXP1bn in 2018 fixed-rate notes. Fitch has assigned a rating of AAA on a national scale. The bottler of Coca Cola and other products faces a MXP1bn maturity this month and will use proceeds to refinance the debt and also pay for acquisitions. BBVA is managing the sale, with HSBC as co-manager. The timing of pricing is unclear, as conditions in September and October have seen even the strongest Mexican corporates put off DCM plans.
IFC Launches Mexican RMBS Support Facility
The IFC plans to launch a $150m debt facility to help mitigate potential liquidity shortfalls in Mexico’s housing finance sector. The Mexican Housing Finance Intervention Facility was structured in collaboration with SHF and the IDB and allows the IFC to purchase up to 15% of RMBS to offset future shortfalls in investor demand for these securities. The IFC can also provide credit enhancements to RMBS in the form of partial credit guarantees, in coordination with SHF, or by purchasing RMBS mezzanine risk tranches. “If there is an interruption in the local capital markets, our debt facility can step in and provide comfort to other investors that we are prepared to take senior as well as mezzanine risk, in order to encourage them to keep financing,” Atul Mehta, the IFC’s director for LatAm and Caribbean, tells LatinFinance. The IDB is considering a similar $150m facility, subject to approval next month. The IFC hopes the facility will serve as a model for products in other markets threatened by lack of liquidity. Since 2001, IFC has invested $531m to support Mexico’s housing finance sector.
Calderon Megaport May Have to Wait
Mexico’s government has delayed the bidding deadline for its Punta Colonet port project until January. Bidding for the greenfield port and rail complex in Baja California, which could cost more than $5bn, opened in August. The ministry of transportation aims to give interested bidders – initially numbering over 60 – more time, due to poor conditions in financial markets. The complex is hoped to be the largest project in the Calderon administration’s ambitions infrastructure plan, easing container traffic congestion at the ports of Long Beach and Los Angeles, some 200 miles north. Mexican builders ICA and IDEAL were both preparing bids, as were other builders, and rail and port operators from around the world. Lenders, before long-term financing conditions became prohibitive last month, were anticipating a winner needing innovative local and domestic debt financing solutions.