EMP Latin America, a Washington DC-based private equity fund, has sold a final stake in Mexican telecom Axtel. The roughly 2.5% stake was the last of an original 15% equity investment made in 1997, when Axtel was a startup. EMP got rid of half the original stake in Axtel’s 2005 IPO, and followed in 2007 by another 5% divestiture, the firm says. The final portion was sold for roughly $53m, according to people familiar with the deal. EMP is heard in the market raising a new vehicle for LatAm, though size and timing of a final close are still forthcoming.
Category: Regions
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Ecuador Takes Sweetened America Movil Offer
America Movil, the Mexico-based LatAm telecom giant, has agreed to pay $480m to the Ecuadorean government to renew its local mobile phone concession for 15 years, according to Ecuador’s telecom regulator Senatel. The move comes a few days after Senatel had rejected an initial $307m offer and announced that the operator was leaving the country in August. The government and the mobile operator expect to close the transaction Wednesday. America Movil, which operates in Ecuador through its subsidiary Porta, controls almost 70% of the domestic market.
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Cemex Mulls Hawking Assets to Repay Debt
Cemex is considering selling European assets in order to reduce debt. It could sell up to 26 cement plants in Austria, five cement plants in Hungary and building materials businesses in the UK. The assets in the three countries generated more than $448m in revenue in 2007. Morgan Stanley is advising on the Austrian and Hungarian Assets, and Citi is advising on the UK. Last month, Cemex reported that its net debt stood at $18bn, about 3.7x Ebitda.
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Colombia Plans Swaps for Multilateral Debt
Colombia’s finance ministry is looking to take advantage of favorable exchange rates by swapping dollar debt into peso liabilities, starting with up to $2bn in multilateral debt. The government has a 6-month window in which it can enter into cross-currency swaps on certain issues of debt totaling $2bn, Maria Catalina Escobar, head of external capital markets at Colombia’s finance and public credit ministry, tells LatinFinance. The specific debt issues to be swapped will be announced imminently, and the timing and total amount will be at the government’s discretion. Escobar explains that the banks involved, which could include Colombian institutions in addition to the usual international counterparties, will be chosen in an open bidding process at the time of the individual transactions. Colombia’s total dollar debt stands at about $20bn, according to the ministry. The government is not planning to raise any new debt this year, says Escobar.
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Mexico Bottler Ponders MXP Issue
Mexican brewer and bottler Femsa is considering the issue MXP1.5bn in new local bonds. Femsa is heard hammering out the details and choosing banks this week with an eye on coming to market this month. S&P has given the transaction, still in the planning stages, a mxAAA rating. It raised MXP6bn in 2017 UDI-denominated and 2013 floating-rate peso notes in December via HSBC, Santander, BBVA and Scotia.
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LatAm Borrowers Could See China Option
Once China tackles its currency and liberalizes capital flows it might become a tempting place for LatAm borrowers, since local currency borrowing will provide some hedge for commodity exporters, says Michael Pettis, professor of finance at Guanghua school of management at Peking University in Beijing. “China’s bond and stock markets are still rudimentary although a lot of progress has been made in their development,” Pettis tells LatinFinance. “Both are growing in importance as a source of funding for corporations, although the Chinese investor base is still highly speculative and not particularly rational at allocating capital to its most productive use,” he adds. The fast expanding Asian nation is a huge buyer of commodities and looking to acquire throughout LatAm. “There is a sense in China that it is imperative for national companies to secure access to commodities,” says Pettis. “Securing access to minerals and agricultural products is a key political objective,” he adds, also pointing to infrastructure as a target. But Pettis worries about China’s long-term impact, particularly as it binds Latin America to being little more than a commodity exporter. (For complete interview, see www.latinfinance.com.)
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Peru Seen Holding at 5.50%
Peru’s central bank is expected to keep the reference interest rate unchanged at 5.50% at Thursday’s policy meeting, according to Merrill Lynch. “With inflation moderately decelerating last month – likely marking the peak this year and after raising rates and reserve requirements last month, we think the [Peruvian central bank] will step back this month but maintain its hawkish bias,” Merrill adds.
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Banco Mercantil Shrugs off Bolivia Vote Violence
Violence around a referendum in Bolivia has not harmed the domestic banking system, Juan Carlos Salaues, executive vice president of Banco Mercantil Santa Cruz (BMSC) in La Paz, tells LatinFinance. “The banking system in general and our bank as part of that system has been vaccinated throughout the years against this type of event,” Salaues says. “These vaccines include managing our liquidity index with better ratios, a bigger umbrella for harder rain.” Despite volatile political events over the last 2 years, the economy has actually improved, the banker adds. However, BMSC is carefully monitoring the situation. “Yesterday’s event is another element of a political and institutional process that we have to take into consideration in order to plan our activities in the country,” Salaues adds. BMSC received $250m in deposits in 2006, Salaues says, taking the overall deposit total to $1.3bn. “Our growth is practically of the size of all the mid and small sized banks in the country,” he adds. BMSC is focused on opening more branches throughout the country and plans no further M&A activity as it is still digesting the 2006 merger of Mercantil and Banco Santa Cruz. “Even though we have the financial backbone to do another acquisition, I believe we need to further the consolidation with Santa Cruz,” Salaues adds.
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Bolivia Crisis May Bring Nationalization U-Turn
The growth of the opposition to the government of Evo Morales, exemplified by Sunday’s Santa Cruz referendum, could make Bolivia reconsider the nationalization of its energy industries, according to Alfredo Coutino, senior economist at Moody’s Economy.com. “The nationalizations of Morales have already caused a contraction of private investment in the country and at the same time have caused foreign investors to be cautious,” he adds. However, there is the risk that escalation in the crisis may undermine an economy that is already threatened by leftist rule. The current could worsen as the departments of Beni, Pando, Tarija and Chuquisaca hold their own referenda on autonomy in coming days. “Bolivia is in a transition phase,” says Juan Carlos Hildago, project coordinator for LatAm at the Cato Institute. “We have to wait and see what happens when the other departments have their own referenda. At that point, there has to be a new negotiation between the government and the opposition to see if Bolivia remains one of the most centralized countries in the region or effectively moves towards decentralization,” Hidalgo adds.
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Durango Buckles Under Debt Pressure
S&P has put the B+ rating of Mexico’s Corporacion Durango on CreditWatch with negative implications and warns of significant pending downgrades amid deteriorating debt ratios. “They have too much debt, and are getting caught by higher costs,” says an analyst at a major Wall Street shop, adding that the 2017 was trading around 58-60. “Right now their Ebitda is less than their interest expense,” the analyst adds. The S&P watch follows last week’s demotion from Fitch, and S&P predicts that key financial ratios will continue to exceed assumptions based on the current rating. “We will need to reevaluate the company’s financial and operational strategies to resolve the CreditWatch. Any downward rating action would not be limited to one notch,” says S&P analyst Juan Pablo Becerra. The Mexican paper and packaging firm’s total debt to Ebitda ratio hit 6.8x March 31, versus an S&P forecast of around 3.8x by year-end 2008. Negatives include high debt, a moderately aggressive financial policy, and natural risk associated with the paper industry’s cyclicality. This is partially offset by Durango’s leading position in the containerboard and packaging industries, as well as vertical integration in Mexico. Fitch cut Durango to B minus from B and its 2017 notes B/RR3 from B+/RR3, implying a 51%-70% recovery in the event of default. The ratings remain on rating watch negative. The firm has $14m in short-term debt and $524m in long-term debt. Only last year, the company was planning to buy back bonds in 2008 to spruce up the balance sheet.