Maria Elsa Viteri has become Ecuador’s finance minister, replacing Wilma Salgado, who resigned after disagreement with president Rafael Correa. Analysts do not expect Viteri, who had been the general undersecretary of finance, to make any major policy shifts. There is a close eye on the ministry this week, amid reports that a special debt audit commission will declare the country’s 2012 and 2030 dollar bonds “illegitimate.” Alessandra Alecci, senior analyst at Moody’s, says that neither the commission’s plans nor a change in finance minister have an impact on her agency’s view of the sovereign. She notes that the commission lacks the ability to make policy, and that uncertainty is factored in to the B3 rating. JPMorgan notes in a report that Ecuador’s 2015 bonds, excluded from the commission’s “illegitimate” list, could outperform 2012s and 2030s, which could see pressure if Correa hints at a restructuring. “We expect Ecuador to continue servicing bonds for now, only turning to a possible restructuring scenario in 2009 after the current political cycle is over,” the shop notes.
Category: Regions
Peru Tollroad Heads for Bond Market
In the face of unequivocally rough markets, Peru’s IIRSA Tramo 5, the last stretch of tollroads in the Interoceanica highways, is set to price next week, barring further meltdown, say executives close to the issuer. Three tranches of notes totaling $260m are planned: an $85m 2020, a $100m 2030 and a $75m 2030 zero-coupon bond. The zero-coupon note is being offered locally to Peruvian cash investors, with total proceeds to the issuer expected in the $18m-$20m range. BCP will jointly place the zero-coupon tranche, while lead bank BNP Paribas is responsible for the remainder. Offshore investors can access the notes directly with cash or synthetically through a CLN like structure to be issued by BNP. People familiar with the issuer’s plans say sponsors Hidalgo & Hidalgo are hoping for yields of around 7%-8%. The deal has similar collateral as the previous offerings – CRPAOs, or government-backed certificates to finance infrastructure – but the structure has some new features, including a delayed draw, which reduces the negative carry, say bankers on the transaction. Fitch rates the bonds BBB minus.
LatAm Equity Continues Free Falling
Following last week’s trend, LatAm equity funds dropped 5.54% the week ending September 11, according to Lipper. EM funds sank 4.61% while China region funds lost 4.14%, Lipper data shows. Gold oriented funds experienced the biggest drop of the week, losing a whopping 11.09%, while consumer goods funds saw the biggest returns, gaining 3.41%. In the week before, LatAm equity tumbled 9.54% while EM funds shed 7.37%, according to Lipper. Year to date, LatAm funds are down 23.00%, versus an average 25.29% overall loss, Lipper says.
ICA Keeps Powder Dry for New Projects
Mexican construction giant ICA is working on Mexico City’s metro expansion project – funded by the government – but it is keeping powder dry for deals coming up later in 2008. “We are expecting some other concessions towards the end of the year where capital may be required, and we are preparing for those,” Alonso Quintana, CFO at ICA, tells LatinFinance. He adds that these include the Farac tollroad sequels and some water projects like a $500m water treatment plant in Guadalara, which should be started this year. Water treatment is typically not hugely lucrative, but Quintana says overall returns make it worthwhile, including revenue from construction and structuring. “We try to make it that overall our return is double digit, hopefully getting to 15% area,” says the official. ICA has risen to prominence in Mexico, beating to the punch Carlos Slim’s IDEAL on several high profile transactions. “Our objective is not to beat IDEAL. Our target is to win the big projects we feel most competitive in and where we have most advantage, where we can create more value,” says Quintana. He adds that ICA is partnering with IDEAL in some projects. ICA is currently focused on roads, airports and some water projects. This includes a high-speed road link between the capital and Veracruz port.
Prudential Approves Loan to Verde Mexico
US real estate conglomerate Prudential has closed a $46.5m loan through its Mexican mortgage subsidiary for Verde Realty’s Verde Mexico unit. The fixed rate 84-month term loan was combined with an existing $93m loan and is secured through a pool of 22 industrial manufacturing properties located in Tijuana, Juarez, Reynosa and Chihuahua, Prudential says. Terms of the loan were not disclosed.
Brookfield Eyes Colombia Opportunity
Major global real estate player Brookfield Asset Management (BAM) is surveying the opportunity in Colombia’s ripening infrastructure market. “Brookfield Asset Management has been actively looking for investment opportunities and is generally bullish on Colombia, which we see growing rapidly during the next decade,” says Denis Couture, BAM’s senior vice president for government relations and international affairs. “At this stage, we are mostly interested in infrastructure investments.” BAM is a Toronto and New York listed asset management firm with more than $70bn under management. Colombia is heating up generally for real estate and infrastructure investors. Foreign private equity funds are surveying the opportunity in the office and industrial market, but they have yet to close any substantial transactions. Investors are seeking experienced local partners. “Colombia is emerging as an important target market for global private equity firms, and a number of local managers are currently raising venture capital or private equity funds,” says Cate Ambrose, executive director of the Latin American Venture Capital Association.
Ecopetrol Prepares ADRs
Ecopetrol has filed to list up to 20m ADRs in New York beginning September 18. Each ADR will represent 20 ordinary shares in Colombia’s state-controlled oil company, via JPMorgan as the depository bank. Ecopetrol raised almost $2.8bn in a September 2007 international and domestic IPO in which it floated 10% of the company. The stock closed at COP2,675 ($1.30) Friday.
Mexican Builder Mulls Punta Colonet
ICA, the integrated Mexican construction firm, is mulling its strategy regarding the $4bn+ port at Punta Colonet in Baja California. “It’s quite important, we’re studying it, we’re looking for partners,” Alonso Quintana, CFO at ICA, tells LatinFinance. Mexico’s government opened bidding late August for the contract to build LatAm’s first greenfield port. Quintana adds that a natural partner would be Goldman Sachs Infrastructure Partners, with which ICA worked on the first Farac project. “It’s a bit more interesting as a construction project than as the whole concession, but we would still be looking at the concession as well,” says the CFO. Quintana expects the winner to use traditional project finance to fund the deal. “Once the cashflows are transparent enough and visible for the banks, there’s ever more creative ways of putting the money in,” says the official. The government says the project should be ready to start construction next year for completion in 2012. Some analysts say it could cost as much as $7bn. The West Coast facility is the biggest in president Calderon’s infrastructure plan and should divert container traffic away from the congested US ports of Long Beach and LA, via a planned rail connection to the US. Carlos Slim’s IDEAL has formed a consortium to bid with Grupo Ferromex and cargo terminal operator MTC Holdings. The government says it has more than 50 interested bidders. Hutchison Port Holdings, SSA Marine, DP World, Union Pacific and BNSF are also expected to participate.
PE Fund Planned for Mexican Miners
Mexico is working on setting up a $100m-$120m private investment fund to take temporary minority stakes in mining companies and raise cash through equity in Toronto or debt/equity in Mexico. “We will finish the study this year and if everything is favorable, we will launch it in 2009,” Mexican mining coordinator Norberto Roque tells LatinFinance. The fund is a Mexican economy ministry initiative, but the government will have only a 20% share, with the rest coming from private sources. This includes $20m from Corporation Mexicana de Inversiones, a fund of funds partly owned by Nafinsa. “The government will catalyze participation from other economic agents,” says Roque. The new vehicle will invest on a medium term basis. “Depending on the project, it could be 5-7 years,” says Roque, talking about commitment period. Mining is a leading sector for foreign investment in Mexico, which is also working to boost technology and marketing of its geological potential. “We are the biggest recipient of mining investment in Latin America,” says Roque, adding that Mexico’s main rivals are Peru, Chile, Brazil and Argentina. “There’s a lot of competition and for that reason, we have to work very fast to maintain our level.” Mexico expects to get $3.3bn in mining investment this year, up 54% year-on year, rising to $3.6 billion in 2009. Roughly 40% of that comes from abroad, including 77% from Canada, says Roque.
Mexico Preps Novel Mining Fund ABS
Mexico plans to tap local debt markets to maintain development of its minerals and metals sector, the government’s mining chief tells LatinFinance. The Fideicomiso de Fomento Minero (FIFOMI) aims to make loans to support the mining sector totaling $500m equivalent this year, rising to $1.1 billion by 2012, says Norberto Roque, Mexico’s mining coordinator. It will source extra funds from domestic capital markets. FIFOMI recently did a MXP300m issue of short term certificados de credito, through Scotiabank. “Next year, we’ll do not just certificados de credito, but a securitization of the portfolio,” says Roque. In 2009, FIFOMI is planning to place structured bond issues of MXP500m-MXP1bn in size with a 3-5-year tenor, market conditions permitting. “Depending on the demand for our credit, we need to be parri passu with the issuance,” says Roque. Loans of some $680 million are planned for 2009. Roque adds that the domestic debt deals will not carry a government guarantee. “Since the government is not putting in money, we’ll use the markets to get liquidity for the fund to be able to lend more,” says Roque. FIFOMI lends to mining SMEs – including operators, equipment providers and other support companies – with a view to strengthening the supply chain. Loans are for a tenor of up to 5 years and an average size of MXP1m, priced basis TIIE. FIFOMI has lent over $300m so far this year to SMEs and Roque describes the loan portfolio as “healthy” with no problems.