Peru LNG, the LNG regasification project being built by Hunt Oil, is planning to issue $200m-$300m-equivalent in local bonds in Peru by year end. The tenor is likely to be 18 years and pricing will come at a spread over Libor, says a banker close to the process. The issuer is also considering dividing the issue into different tranches to offer shorter-dated paper to suit small investors. Among the possibilities being considered is a smaller amount of roughly $50m in 5-year notes aimed at retail buysiders, with the remainder carrying the full 18-year final maturity and a 5-year grace period. The project doesn’t need the local portion given the success in placing more than $1bn in bank and multilateral debt, notes one banker. But he adds it is important to offer a stake in a project of such national importance to the local buyside. Banco de Credito del Peru will assume a co-lead role in an eventual offering, with a second co-lead to be named as early as this week.
Category: Regions
Peru Miner Nears Financing Finish Line
Atacocha Mining Company, one of Peru’s leading miners, is in the final stages of financing the construction of the 115MW Quitarasca hydroelectric plant. The total cost will be approximately $120m, of which $80m will be in debt and $40m in equity, CFO Juan Alberto Franco tells Latin Finance. “We have secured the financing for Quitarasca and the name of the bank will be made public soon,” says Franco. Atacocha took control of the Quitarasca project in 2007 from the Chaprin Energy Company. It is Atacocha’s first foray outside of the polymetalic business. In addition to lead, Atacocha also mines copper and zinc. It acquired Poderosa, a related gold mining operation, in 2006. Quitarasca is a key component in the Peruvian government’s effort to guarantee that energy production meets demand, which is increasing by 10% annually. The country needs to add at least 350MW yearly to satisfy that.
Peru’s Copeinca to List Locally
Copeinca, Peru’s second largest fishmeal processor, is expected obtain approval for a local listing in Peru as early as today, Eduardo Castro Mendivil, CFO, tells LatinFinance. “Local investors are more stable than EM investors and the multiples in the local market have been very good thanks to ample liquidity,” says Castro, whose company has been listed on the Norwegian exchange since January of 2007. “We want to take advantage of that,” he adds. If confirmed Copeinca’s depository receipt would be the first for the fishmeal sector in Peru. The listing will not involve any new capital raising initially, but could open the door for a local market tap in the future, says the CFO. Other companies including Telefonica, Credicorp and Buenaventura have sought local depository receipt listings. No banks are assisting Copeinca in the process. Copeinca commands roughly 10.5% of the local fishmeal market.
Pemex Reform Targets Higher Debt Capacity
A reform of Mexican state-owned oil giant Pemex, set for voting in mid-August, won’t result in the company’s ability to sell an equity stake to private or public investors, government officials tell LatinFinance. “It is highly unlikely that Pemex will eventually be able issue any kind of equity,” Marco Oviedo, general adjunct director for public debt at Mexico’s Hacienda, tells LatinFinance. Instead, the reform will target measures that allow Pemex to take on debt at the corporate level, he adds. Today, as a state-owned entity, Pemex’s indebtedness levels are capped at virtually zero. It uses off-balance sheet vehicles to issue notes and raise bank debt. Ability to raise additional debt on its own balance sheet would help it fund an increase in production, which is steadily dropping, says Oviedo. Other changes being considered include allowing Pemex to outsource some of its production and exploration business to third parties. An extraordinary session in congress is scheduled for mid-August, when the proposal for a change in the rules governing Pemex will be presented to the country’s various political factions. Most of these are openly opposed to anything resembling a privatization of the oil company. Pemex has a mandate to invest up to roughly 2% of Mexico’s annual GDP in E&P.
ISA Seeks Bridge, Bonds for Peru Project
Colombia’s state-owned Interconexion Electrica (ISA) is shopping around for banks to provide a bridge loan while it studies options to finance the construction of a dual transmission line it recently won a concession for in Peru. On June 17, ISA won the concession to build two 500KV lines from Chilca, in the south of Lima to Zapallal, 100km to the north. The cost is estimated at $125m. “We are looking at different options, but we will likely do a bridge loan before issuing bonds in Peru for the project,” ISA CEO Luis Fernando Alarcon tells Latin Finance. The first transmission line, which will initially transmit 200KV, has to be built in 20 months, the second in 30 months. ISA is the largest electricity transmission company in Peru, with more than 7,000km of power lines. In its native Colombia, ISA is studying the possibility of entering the highway business and possibly the natural gas sector down the road. It is seriously studying a bid for the Colombian government’s Ruta del Sol project, says Alarcon.
IFC Takes 10% in Colombia Chemical Outfit
The IFC has paid $25m for a 10% equity stake in Colombia’s health and chemical products manufacturing and distribution firm Tecnoquimicas, according to the multilateral. The funds will support the expansion of the company’s operations in the Andean region and Central America, says IFC. “The investment will also help the company increase the supply of affordable and high-quality medicines in these regions,” adds the multilateral. IFC recently bought an equity stake in Panama’s Grupo Mundial for $15.6m, increasing its position in the company to 9.9%.
Banorte Banks on SME, Mortgage Growth
Borrowers in Mexico’s small business sector and the lower portions of the housing markets will offer the greatest lending growth opportunity in the country’s competitive financial services sector, Alejandro Valenzuela, CEO of Banorte tells LatinFinance. The only remaining large Mexican-owned bank is increasing its SME portfolio through new bank account and payroll products. Valenzuela believes there is plenty of space in the market for banks willing to write mortgages for the lower end of the housing scale. “The premium segments tend to be more crowded because that’s where all the banks find good returns with lower risk,” Valenzuela says. “The C and D markets will be the next stage of development and that’s totally under-banked. Managing the risks correctly, the potential there is tremendous.” Lacking ties to one of the troubled global powerhouses, his bank is able to concentrate on careful expansion, he explains. For the full interview with Valenzuela, go to LatinFinance.com.
Mexico’s AGSA Securitizes Wood Contracts
Agropecuaria Santa Genoveva (AGSA) has placed a MXP1.65bn in 2028 securities backed by future flows from wood sales. In what bankers claim to be a novel transaction for the Mexican market, AGSA will pay holders 40% of the revenue from its sales of teak wood, a specialty product used in building outdoor furniture. That is a different pricing method than the traditional yield or coupon format. In the transaction, approximately MXP400m of the proceeds will be used to purchase zero-coupon government bonds that will be worth MXP1.65bn in 2028, which will go toward repaying principal. The remaining MXP1.25bn will be used to expand AGSA’s asset base, with new teak tree acreage going into the existing trust along with the assets at the time of issue. The quasi-equity nature of the deal is important for the issuer’s business plan, as most of the trees in the trust have yet to be planted. The teak trees involved take 18-20 years to reach maturity. AGSA expects sales revenue to approach MXP6bn by 2027, up from MXP100m in 2007, according to a regulatory filing. Demand for the deal matched the issue size of 1.65bn, according to a banker involved in the transaction. The issue was placed exclusively with pension funds, and was designed with the pension regulator’s ABS guidelines in mind. The transaction was rated AAA, based on the use of the government bonds to guarantee repayment of the principal. Credit Suisse managed the sale.
Moody’s Downgrades Mexican Toll Road
Moody’s has downgraded Mexico’s Libramiento de Matehuala toll road national scale rating to Aa2.mx from Aaa.mx and placed the rating under review for further downgrade. The global scale local currency and underlying ratings remain Baa3. The downgrade follows the recent downgrade of the project’s global scale rating to Baa3 from A2. The review will consider the expectations for the project’s future financial and operating performance in light of recent historical results and how the project compares to other Baa3 rated toll roads in Mexico. Another important factor is whether the downgrade of the project ‘s insurer XL to B2 from A2 could have any direct impact on the underlying credit profile. Libramiento Matehuala is a 14 km long toll road built as an alternative to Boulevard Matehuala, which bisects the city of Matehuala, Mexico.
Ecuador Considering Debt Issuance: Reports
Ecuador could issue $800m in debt in the local market as early as December in anticipation of a return to the international debt markets in 2009, reported news agencies last week citing finance minister Fausto Ortiz. Ortiz was quoted as saying the government had contacted Ecuador’s social security fund IESS offering to place the entire $800m issuance with it directly. The minister said Ecuador would seek to lower interest rates and improve terms on its current international issue with a new visit to the markets, say reports.