Molymet is preparing to sell MXP1.5bn in 2018 bonds September 2, marking what is understood to be the first sale of bonds in Mexico by a Chilean company. The metal processor plans to issue MXP1bn in peso-denominated fixed-rate notes and MXP490m in notes denominated in the UDI inflation-linked unit. Proceeds will repay a two export loans due September 10 – a $147m loan from Banco de Chile that pays 3.36% and a $46m loan from Scotia at 3.23%. The local bond issue is rated AA by S&P and AA+ by Fitch, both on a national scale. Banamex is leading the offer. Molymet operates a Molybdenum processing facility in Cumpas, Sonora.
Category: Regions
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Investors Load Up on Mexico Debt/FX
The buyside has aggressively added to positions in Mexico, according to JPMorgan, which last week surveyed investors managing $511bn in EM fixed income and FX assets. The move was driven by significant reduction in underweights by real money accounts, while JPM also notes that trading accounts are now just into overweight, for the first time since early 2003. “Mexico sovereign supply continues to be a positive for the credit, as not only is no supply anticipated, but the warrant maturities should reduce still further the stock of debt outstanding.” Investors also added to Chile, while small reductions were seen in Ecuador and Venezuela, says JPM, which maintains external debt technicals at positive. “Local markets exposure by international investors are at their highest levels this year. Dedicated investors increased from 28.7% to 29.1%, while trading accounts increased from 41.4% to 41.8%,” it adds. The shop estimate year-to-date inflows to EM FX and fixed income stand at $11bn, but it sees downside risks to the full year forecast of $20-25bn. Investors say they expect the JPM GBI-EM Global Diversified index to return another 3.4% this year, with duration contributing 75% and FX contributing 25%, implying full year returns of 8.6%, below JPM’s 11% house forecast. Investors also expect the benchmark EMBI Global to return 1.7% through year-end. “Supply risks are concentrated in the corporate sector, in our view, with about $41bn of issuance remaining. Sovereign issuance may total $17bn for the remainder of the year, versus EMBI Global index cashflows of $10bn for the rest of the year,” says JPMorgan.
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Local Consortium Awarded Peru Concession
A consortium formed by local developer Grana y Montero and logistics operator Oiltanking Peru has won the concession to build and operate a $107m, 245km pipeline that will transport will transport up to18,000 bpd of liquefied petroleum gas and other hydro carbons from a pumping facility operated by Argentinean group Pluspetrol in Pisco to a storage facility in Lurin, a city near Lima, the Peruvian investment promotion agency ProInversion says. The consortium will build the pipeline, known as Poliducto Pisco-Lurin and operate and maintain it for 10 years, ProInversion says. An estimated $70m will be used for the construction of the pipeline, while $37m will be spent in operations and maintenance in the 10 year period, the agency adds.
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S&P Upgrades Panama’s Banitsmo
Citing the implementation of underwriting policies, procedures and technology from parent company HSBC, S&P has raised its long-term counterparty credit rating on Panama’s Banistmo to BBB from BBB minus. The outlook was also revised to stable from positive. “The upgrade reflects the bank’s improved risk management and better financial flexibility, which we expect to continue strengthening its financial profile,” the agency says. The rating reflects the bank’s strong market position in Central America and its adequate operating performance, S&P adds. “The stable outlook reflects our opinion that the improvements in risk management will continue benefiting Banistmo’s financial performance in the medium term,” the agency adds.
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WisdomTree Sprouts Chile, Mexico ETFs
WisdomTree Asset Management plans to launch 25 new exchange-traded funds (ETFs), including funds exposed to the Chilean and Mexican pesos, as well as an overall LatAm local currency vehicle. The funds will provide exposure to changes in the value of the local currency peso relative to USD by investing in short term securities and instruments designed to provide exposure to local FX and rates. They will do this by primarily investing in short term US money market securities and forward currency contracts and swaps to create positions economically similar to a money market security denominated in pesos. They will maintain a weighted average portfolio maturity of 90 days or less and will not purchase any security with a remaining maturity of more than 397 calendar days. Performance is expected to be closely tied to social, political, and economic conditions in Chile and Mexico, and be more volatile than more geographically diversified funds, says Wisdom Tree. Dreyfus, a unit of Bank of New York Mellon, will be the sub-adviser of the ETFs. WisdomTree is also launching separate BRIC and LatAm currency funds. The LatAm vehicle will pick a basket of up to 10 currencies from a pool of eligible currencies to provide a representative and diversified proxy, balancing liquidity and geographic and economic diversity. David Kwan and Zandra Zelaya will be the portfolio managers of the proposed ETFs.
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Cemex Still a Buy: Banif Ixe
Banif Ixe is maintaining its buy recommendation on Cemex and has a year-end target price of MXP27.00 for the company’s shares. “Although we see as negative that last night the Venezuelan government took over the operations of Cemex in Venezuela, the impact of the lost ebitda is not enough to change our recommendation,” says the shop. The nationalization of the company’s assets will reduce Cemex consolidated ebitda by around 3.7%, add the analysts. A takeover implying firm value to Ebitda multiple of 6.2x would make for a favorable transaction for Cemex, says Banif Ixe. “If this happens, Cemex will receive approximately $1.02bn from the Venezuelan government, with a neutral impact on the company.”
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GMAC Mexicana to Sell Auto Loan ABS
GMAC Mexicana is preparing to sell floating-rate MXP-denominated bonds backed by a pool of auto loans. The size and tenor have not yet been defined, but the offering will consist of at least one subordinated tranche. Although GMAC’s Financiera and Hipotecaria units have issued MBS in Mexico, this offering would be the first securitization by GMAC Mexicana, the auto loan unit. Scotia is managing the transaction, expected in the next one to two months, according to executives close to the process.
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Moody’s Moves Peru Closer to I-Grade
Catching up with the other agencies, Moody’s has raised the foreign-currency bond rating of Peru to Ba1 from Ba2, one level beneath investment grade. The shop has been the most conservative of the three major ratings agencies during Peru’s recent period of unprecedented growth and macroeconomic stability. Fitch gave Peru a BBB minus grade in April, and S&P followed in July. “The upgrade was prompted by steady improvement in Peru’s sovereign credit profile driven by a continued and accelerated strengthening in the balance sheet of the government and the local banks,” says Moody’s. Peru’s government has also reduced the proportion of foreign currency debt, and banking system, has greatly reduced the share of dollar-denominated loans and deposits. The agency expresses concern, however, that socio-economic challenges pose potential political risks to the country’s medium-term outlook. “All three agencies have recognized that Peru has significantly improved its credit profile and that the improvements made are likely to be sustained,” says Goldman Sachs, commenting on the Moody’s move that it sees as “warranted and well deserved.”
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Venezuela Unlikely to Knock Cemex
The seizure of the Venezuelan assets of Cemex by the Chavez government will not have a huge impact on the Mexican firm’s overall financial performance, according to analysts. “The Venezuela business is very small in the big scheme of things,” says Revisson Bonfim, an analyst at Fitch. “We believe that in the end of the day Cemex will end up selling the entire company to the government. The big question is whether or not they will receive market value for those assets,” he adds. Production from Venezuela represented only 3.7% of the consolidated Ebitda of Cemex, Rodrigo Herrera Matarazzo, an analyst with Ixe Casa de Bolsa in Mexico City says. “Even though this process of negotiation could be extended, we don’t see a mayor effect on consolidated results,” he says. Previous businesses nationalized in Venezuela went for a reasonable price, notes Bonfim. However, Matarazzo is cautious on the outcome of negotiations. “Once the agreement has been reached, then we can qualify whether it is good or bad [for Cemex],” he adds. Yesterday, S&P affirmed its BBB (negative) long-term corporate credit rating on Cemex and subsidiaries based on expectations that the company will reach financial targets in the next two quarters.
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Fitch Sees More Pressure on Metrofinanciera
Fitch has downgraded Mexican mortgage company Metrofinanciera’s individual rating to D/E from D (stable), given continued pressure on capital adequacy, asset quality, liquidity and refinancing needs. The downgrade of the individual rating reflects continued weakening of asset quality, liquidity, capital adequacy, profitability and business risk. Asset quality in both the mortgage and construction loan portfolios has deteriorated at a relatively fast pace and the worsening credit environment puts on additional pressure. Fitch also affirmed the foreign currency long-term IDR at B+ (stable. Last week, Metrofinanciera filed to issue MXP1.6bn equivalent in 2033 notes denominated in the UDI inflation-linked unit and MXP769m in MXP-denominated 2038 notes. The company is also planning to issue MBS worth approximately MXP2.3bn, despite choppy markets, competing large issues and financial troubles.