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.
Category: Regions
Banxico Auctions Another $6bn
Banxico Tuesday announced that it made two auctions worth a total of $6bn, the first at an exchange rate of MXP12.86 and the other at a rate of MXP12.76 per dollar. The news comes after the bank auctioned $400m at an exchange rate of almost MXP13 per dollar a few days earlier. Mexico’s peso snapped back before closing at MXP12.44. The currency has firmed off last week’s trough of MXP14.35/USD.
Soldexsa Shops in Colombia and Venezuela
Peruvian welding conglomerate Soldexsa has agreed to acquire three companies in Colombia and Venezuela for an undisclosed amount. The targets are Soldaduras West Arco and Soldaduras Megriweld in Colombia, and Comercializadora de Electrodos of Venezuela. The buyer says that while the parties involved have approved of the sale, the transaction will close once legal procedures with the Colombian government are finalized. Soldexsa has a presence in the US, Canada, Chile, Colombia, Bolivia, Ecuador, Guatemala, Costa Rica, Sudan and Switzerland.
Colombia Prefunds 2009 with IFIs
Colombian finance minister Oscar Ivan Zuluaga said Tuesday the government has secured 2009 foreign financing with loans from multilaterals. The government will get $1bn from the World Bank, $1bn from the IDB and $400m from CAF, following deals hammered out at the weekend in DC. It also got $650m in IDB cash for Bancoldex, using a sovereign guarantee. The ministry adds that Colombian officials spoke to representatives of the Arab Emirates’ finance ministry, as well as Japanese market participants, about infrastructure investment and potential future bond issues. Colombia had planned to borrow $2.411bn from abroad to finance its 2009 budget, including $1.4bn from multilaterals and $1bn from international bond deals.
Peru Talks International Bond Return
Peru’s finance ministry says it is contemplating a 30-year cross-border bond issue of $400m-$600m. The transaction could occur “in the coming weeks,” after finance officials received interest from international investors while in Washington this past weekend, the ministry adds. It would be Peru’s first international bond since a $1.2bn offering of 6.55% 2037 bonds in March 2007 via Deutsche Bank and Citi. Given current market turmoil, an issue of such size and duration seems highly unlikely short term, even from a high grade sovereign. Investors are waiting for stability before buying and their extreme caution would have a significant impact on tenor and spread.
Panama Nails Down Canal Funds
Infrastructure projects are being delayed across LatAm, but the strategically important Panama canal appears resilient. The Panama Canal Authority (PCA) has secured $2.3bn from multilaterals to finance expansion, bypassing an originally considered commercial bank tranche. The 20-year loan package includes 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. The canal will pay an average effective interest rate of 5.48%, says CEO Alberto Aleman. He adds that spreads over Libor on different tranches in the package are 48bp, 75bp and 120bp stepping up to 140bp. “We entertained a commercial tranche, but the offer from the multilaterals was better in terms of length and rates,” he says, adding that a final decision on this was made last week. Bond financing was never considered. Aleman says multilaterals offered up to $2.9bn in support because they recognize the importance of the project to global trade. JBIC’s $800m facility includes a 50% commercial tranche for Japanese banks. The remainder of the $5.25bn project will be paid for with canal generated cashflow. Aleman says the PCA has already factored in slower traffic in FY2009 – 303m tons versus 310m in FY2008 – and that it will not affect ability to pay for the project. Mizuho is financial advisor to the PCA. Offers from multilaterals began trickling in this summer, with the authority saying in August that it had enough to bypass commercial banks, which are now largely closed.
International Oil Firms Move on Ecuador
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.
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.
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.