A $1bn project finance package for Tren Interurbano de Guanajuato (TRIG), a light railway system in the eponymous Mexican state is heard forthcoming in the next six weeks, say bankers close to the process. The 10-year financing, being led by WestLB, is a refinancing of existing project debt. A substantial portion of the new debt will also come via a subordinated tranche, says the banker. The new package is to be rated and will include a guarantee by German ECA Hermes. ICA and Siemens’ Mexico arm are the two engineering shops working on the project. Pricing and tranche sizes are still forthcoming. The deal is among a handful of large projects in the works across the region, and one of several deals being led by WestLB. Others include Peru LNG, Transalta, and Buenaventura Port.
Category: Regions
Credit Suisse Wins Big At LatinFinance Gala
Credit Suisse, Mexico and Cleary Gottlieb were among the big winners at last night’s LatinFinance 20th Anniversary Gala Dinner & Awards Ceremony in Miami. Following is a list of winners presented at the event.
Banesco Plots CentAm Expansion
Banesco, Venezuela’s leading bank by assets, is planning to expand further into Central America after opening up shop late last year in Panama. “The next 10 years are going to be the golden decade of Central America,” Juan Carlos Escotet, Banesco’s president, tells LatinFinance. “We’re not looking at competing in Brazil, for example, although not because we’re not professionally capable, but because the capital demands are large,” Escotet explains. “It’s much more logical to target the Central American region.” After three years of strong economic expansion in Venezuela, growth is likely to continue at a slower pace over the medium term, suggesting the outlook for domestic banks is deteriorating, according to Fitch. With this in mind, Banesco is being proactive in its overseas growth. Escotet says Banesco examined the possible acquisition of two banks, in Costa Rica and Guatemala, but in the end opted to install and develop its own banking model – a move far less costly than undertaking acquisitions. Banesco used its own capital to fund the opening of a full retail bank in Panama last year. It has operated an international bank in Panama since the mid-1990s, and has small operations in Florida and Puerto Rico. Panama was the place of choice to expand, Escotet says, because Banesco already had a footprint there and because the country has become a key destination offshore for funds belonging to Venezuelan high-net-worth individuals. Banesco’s Panama operation held $704 million in assets at the end of 2007, and made a net profit of $8.7 million. At the end of 2007, Banesco had total assets of $12.88 billion equivalent in bolivars – up 51% in a year.
OMA Approves Stock Repurchase
The board of Mexico’s Grupo Aeroportuario del Centro Norte (OMA) has approved a MXP300m share repurchase. The total adds to a MXP1bn amount authorized for share repurchases last year. It is unclear how the repurchase will be funded.
LatAm Stock Funds See Stellar Gains
LatAm equity funds soared 5.78% in the week ending April 3, taking it to a net 1.79% rise year-to-date, according to Lipper. China region funds were the biggest gainers of the week with 6.97%, while EM funds rose 3.28%. After China, the next big performer was real estate funds, gaining 6.30%. Overall, most world equity funds reported gains, with a combined rise of 3.22% for the week, according to Lipper. EM debt funds meanwhile returned 0.48% in the week ended April 3, according to Lipper. International income funds experienced the biggest drop with 1.11%, while global income funds lost 0.67%. High yield funds made 0.67%, the biggest climb of the week.
Mexican Economy to Grow in 2008: CS
Despite the economic crisis in the US, the Mexican economy will experience moderate expansion in 2008, according to Credit Suisse, forecasting growth at an average annual rate of 2.4% in 2008, down from 3.3% in 2007. The Mexican government reported that the monthly GDP proxy rose 4.2% year-on-year in real terms in January and 0.9% relative to December (non-annualized), after adjustments, says the shop. “These were surprisingly strong figures, considering that real GDP growth averaged 3.3% in 2007,” CS says. The available data for early 2008 supports the thesis that the Mexican economy is more resilient than in the past. “It’s still early, but so far, so good,” the shop says.
Mexico Warrant Sale Sees Strong Demand
Mexico’s sale of $1.25bn in notional value of warrants was well bid Thursday, highlighting robust investor interest in rotating from legacy hard currency paper into domestic debt. The transaction, which continues Mexico’s ongoing liability strategy, gives the option to exchange UMS bonds denominated in foreign currency for domestic notes. Warrants with a notional value totaling $1bn allow investors to swap 21 series of USD, EUR, Deutsche Mark and Italian Lire denominated notes for 2014, 2017 and 2036 Mbonos priced at $23.00 each, versus a $17.50 minimum. The second series, totaling $250m and swapping the same 21 series for 2017 and 2035 bonds denominated in UDIs – the first time UMS has offered the inflation-linked unit in a warrant deal – priced at $19, versus a $10 minimum. Demand reached $3.2bn for the first series and $962m for the second. The price was lower than the estimates given before the sale, such as $48 and $41 expected by Lehman. However, more important than the price, notes a DCM banker away from the deal, was the oversubscription, as the value is in the exchange of foreign debt for domestic, rather than in cash collected in the sale of the warrants themselves. The exchange will occur October 9. Barclays and Merrill Lynch managed the transaction.
Real Money Awaits Next Peru Promotion
It may take a while before investment grade-only investors start piling into Peruvian assets en masse, since most need another endorsement. “Many investors will still need an upgrade from a second ratings agency in order to invest in Peru,” says the head of strategy at a leading US-based shop, adding that the ability to allocate depends on each fund’s covenants. S&P has Peru at BB+, one notch below investment grade, while Moody’s rates it Ba2, two notches below. Fitch yesterday upgraded Peru to BBB minus. S&P is likely to raise Peru in the next 12 months, says Goldman, which notes “the upgrade to investment grade is likely to attract additional investment inflows into Peru in terms of both FDI and portfolio inflows, increasing the already strong pressures for the PES to appreciate.” One tangible benefit for Peru should be increased stability as it lures a higher class investor. “From a risk-reward point of view, it will become a less volatile country because of the nature of the investors that will be entering [the bonds,]” says the head of strategy at the Wall Street firm.
Mexican Banks Sound in Downturn, Fitch Says
The Mexican banking system has maintained sound performance, and the outlook remains adequate for the foreseeable future, Fitch says in a report. However, strong loan growth domestically has affected delinquency ratios, and global capital markets conditions put pressure on the cost of credit and funding, as well as liquidity. “While continued asset quality deterioration may be of some concern, banks with the worst-performing retail portfolios are gradually tightening lending acceptance criteria, while risk-adjusted profitability remains sound,” the agency says. Fitch expects adequate performance from the major banks, spurred by continued double-digit loan growth, despite the likelihood that profitability will decline from recent historic highs.
Moody’s Chops Mexico’s GMAC
Moody’s has lowered the ratings of the senior certificates MXMACFW 07U issued under the MXMAC program established by GMAC Financiera in Mexico to Baa3 from A3 on the global scale. The agency also cut the senior certificates MXMACFW 06U of the same program to Baa3 from A3 in the global scale and placed it on review for further downgrade. “This rating action is based on the continued weaker than expected performance of the collateral assigned to the transaction,” says Moody’s.