S&P has raised Trinidad and Tobago to A (stable) from A minus to reflect continued strengthening of fiscal and external accounts. Backed by a booming energy market, the economy has grown an average of 9.3% annually since 2003 and that is expected to grow about 7% in 2008. The stable outlook represents the needs to do further economic diversification, a key step to reducing vulnerabilities that the non-energy deficit continues to highlight, the agency states. “Improvements in transparency and governance, in particular among the public-sector enterprises, could further strengthen Trinidad and Tobago’s creditworthiness,” S&P says. “Slippages in the pace of restructuring government-owned entities or significant increases in an already-high level of fiscal spending could lead to an unfavorable rating action,” the agency warns.
Category: Regions
Mexico’s Collado Slashes Bond Size
Market conditions continue to challenge Mexican debt issuers, as Grupo Collado managed to place just MXP400m of an issue originally set for MXP1.2bn. The steel processor priced MXP200m in 2011 bonds last week at TIIE plus 290bp, and MXP211m in 2010 bonds at TIIE plus 195bp. Collado scrapped altogether a third tranche with a tenor of up to 5 years. It is heard aiming to still sell a third tranche, as the offering was intended to repay some MXP700m in expensive debt maturing this year. Ixe managed the transaction, rated A minus on a national scale.
Peru Sponsors Ready Infrastructure Bond
Ecuadorian concession operator Hidalgo & Hidalgo, through its Peruvian subsidiary CASA, is heard close to launching bond financing for the fifth and final leg of Peru’s Interoceanica highways, or IIRSA Tramo 5. The dollar-denominated PPP bond is expected in the $200m size area, and will feature the basic characteristics of the CRPAO structure, in which Peru’s government guarantees payment on notes issued from a trust. BNP Paribas is leading the deal, having structured previous financings for Peruvian toll roads. The transaction – set to meet the same tough market conditions as all other LatAm issuers, as well as investor aversion to complex structured deals – is heard to include novel features like a delayed draw, which adds flexibility to the borrower’s access to funds. In a typical CRPAO structure, notes are issued from a trust and proceeds sit in a remote vehicle, which feeds cash in increments to the concessionaire as it meets construction milestones. Deutsche Bank has been active in these deals, completing at least one this year that was redistributed in the form of CLNs to EM institutional investors. In one transaction, Grana y Montero – the Peruvian developer – and JJC Contratistas raised $193m through a trust that has an 18.5-year life and can issue debt and derivatives.
JPMorgan Scales Back Dicey Andean Credit
Problematic policy framework and downward trending oil may cause problems for Venezuela’s and Ecuador’s sovereign debt, JPMorgan says. The bank recommends reducing exposure to both sovereigns’ dollar-denominated bonds, cutting them to underweight from marketweight. “While current spreads are not reflective of the tremendous oil windfall that both countries have enjoyed year to date and oil prices are still some $20 per barrel above levels that would start to be problematic for external and fiscal accounts, we believe that the political calendar will encourage faster spending and unpredictable presidential behavior,” it says in a report. Falling oil improves the picture for import-dependent sovereigns, however, as the shop raised El Salvador to overweight from marketweight.
Mexican Microfinancier Plans Share Buyback
Banco Compartamos plans to ask its shareholders to approve a MXP700m share buyback fund. The Mexican microfinance bank’s shareholders will vote August 26 on transfer of retained earnings to a special buyback fund, to be used without a time limit. The program would help “maintain a market for the company’s shares,” it says.
Pinfra Holds Jumbo MXP Road ABS
Mexican infrastructure operator Pinfra has delayed a MXP6.5bn securitization to refinance debt tied to the Mexico-Toluca (Mextol) toll road concession which had been set to price today. “It has been postponed, but the structure hasn’t changed, it’s still in the market,” Pinfra CFO Carlos Cesarman tells LatinFinance. He adds that the delay was caused by regulatory issues remaining to be straightened out, rather than external problems or choppy market conditions. ING is managing the transaction, which coincides with widespread volatility that has made investors much more selective and vigorous in their credit work. In addition, Banxico meets Friday, and analysts expect another 25bp hike. Local investors are still cash rich but they want higher returns to cover the uptick in risk, particularly for structured products, where “back to basics” is the mantra. Borrowers generally have been unwilling to concede sufficient spread. Pinfra had planned to sell around MXP6.5bn equivalent in 2030 bonds denominated in the UDI inflation-linked unit to replace some MXP5.57bn in UDI bonds issued in 2006. Funds remaining after the repurchase can be used for additional construction.
Posadas and LaSalle Team Up for Hotels
Real estate player LaSalle Investment Management has signed a pact with Mexico’s Grupo Posadas to invest $60m in the development of eight of Posadas’ Fiesta Inn and One hotels. Under the terms of the agreement, Posadas will build and operate the hotels. In July, Grupo Posadas placed MXP750m in 2013 to yield TIIE+190bp. The issue was a retap of a MXP1.5bn deal sold in April to help fund the repurchase of dollar bonds.
Bolivia Not Affected by Referendum: Fitch
Ratings on Bolivia will remain unchanged after the referendum last Sunday, according to Casey Reckman, an analyst with Fitch. “The outcome from the referendum doesn’t necessarily resolve anything and doesn’t really change our view, because we already incorporate the general ongoing political instability in our current rating level,” she adds. “On the other hand, an easing of social tensions which results in improved governability, along with continued macroeconomic stability, could benefit Bolivia’s credit fundamentals,” Reckman says. Boosted by his victory at the polls, president Evo Morales announced yesterday that the country is seeking investors for two big gas fields in the country. Fitch currently rates Bolivia B minus, with a stable outlook.
Gold Fields to Invest $800m in Peruvian Mine
South African miner Gold Fields plans to invest $800m in the Cerro Corona gold mine located in Cajamarca, Peru’s state owned news agency Andina says. The mine is expected to produce 356,000 ounces of gold during the first year of operation and 375,000 the year after, Andina adds.
CS Frets Over Vene Solvency
Credit Suisse is recommending flat positions in Venezuela bonds after a decline in oil prices which could undermine the Andean nation’s solvency. The shop says it is cutting losses on a June 8 recommendation of long positions in sovereign 2023s hedged with 5-year CDS. “Our main argument for extending duration in Venezuela was the benefit the external and fiscal accounts would derive from the strength of global oil prices. The recent sharp drop in commodity prices has come at an inopportune time for Venezuela,” says the shop. After November 23 state and muni elections, Chavez aims to revive the constitutional reform process and boost the state’s presence in the economy. “The current oil price remains well above the 2007 average, and is still supportive of Venezuela’s external and fiscal accounts. However, new economic policy initiatives, lower growth and persistently high inflation are likely to raise the oil price threshold at which investors start being concerned about medium-term solvency in Venezuela,” says the shop. Credit Suisse recommends unwinding exposure to Venezuela, but still tips a short position in Ecuador 2030s versus short 10-year CDS in Vene. “The impact of a further potential fall in oil prices would likely be more pronounced on Ecuadorian asset prices,” says the shop.