In a long-anticipated return to the market, Jamaica has priced $350m in 2019 bonds with an 8.000% coupon at 97.498 to yield 8.375%, or UST plus 417bp. Guidance was 8.250%-8.375%. Principal will be repaid in three equal installments in 2017, 2018 and 2019. The B/B1 issuer had hinted at a tap when it went on a “non-deal” roadshow in February. Proceeds are for general budgetary purposes, with the EUR200m due next February. The plan is to raise about $600m this year in international capital markets to meet financing needs, says Darlene Morrison, acting finance secretary. Finance minister Audley Shaw told LatinFinance last week the sovereign would be considering all its options to get pricing at 8% or under. Deutsche Bank and Morgan Stanley, which took Jamaica on the February roadshow, managed the offer.
Category: Regions
Fitch Turns Negative on Sanluis
Fitch has put Mexico’s B minus rated Sanluis on rating watch negative owing to a weak liquidity position. The firm had $23.2m of cash and marketable securities on its balance sheet at the end of March 31 and is also susceptible to deterioration in the US auto industry, particularly light truck vehicles. “Cash-on-hand plus cash flow generation may be insufficient to continue amortizing debt in the near-term,” says Fitch. Amortizing debt for the next three fiscal year consist of $35m in 2008 (full year), $36m in 2009, and $93m in 2010. “Difficult credit market conditions, beyond management’s control, have delayed the company’s ability to complete a bond offering announced in October of 2007, which has been put on hold awaiting credit market improvement. However, financial performance deterioration in 2008 may complicate the company’s ability to refinance its debt,” says Fitch. It expects to resolve the review in the next 3-6 months. Sanluis is the world’s largest producer of leaf springs, supplying GM, Ford and Chrysler. It operates in the US, Mexico, and Brazil.
Venezuelan Fertilizer Company Buys Bolivia’s Gravetal
Colombia-based Monomeros Colombo Venezolanos, a fertilizer and chemicals company owned by Venezuela’s state-own petrochems firm Pequiven, has purchased 77.5% of Bolivian soy processor Gravetal. Terms of the transaction were not disclosed. Santa Cruz-based Gravetal produces crude soybean oil and other soy-based products.
Colombia to Unveil Futures, Derivs Exchange
Colombia’s Bolsa de Valores is teaming up with Nasdaq to launch a futures and derivatives platform. The launch date is set for July 23 in Bogota, Steve Phillips, sales manager for LatAm and Caribbean market technology at the Nasdaq OMX Group, tells LatinFinance. The two exchanges have been working on the initiative for several months and are hoping to be ready to trade starting on the designated date, says the executive. The first contract to be offered will likely be a Colombian treasury bond futures contract, with up to a year in duration. Five local currency bonds, or TES, would make up the underlying assets for the contracts. Colombia’s most liquid TES bond is the 2020. A COP-USD futures contract is also being planned, as well as an equity index futures contract, which is likely to come farther down the road, says Phillips. Liquidity is likely to be thin initially, but a Bolsa official says it could eventually match the domestic fixed income market, which sees $1.5bn in daily trade. “The market has asked for a futures contract for debt and for FX,” says the official. Aside from the BM&F in Brazil and the BMV in Mexico, LatAm is sorely lacking in futures and derivatives exchanges. The BM&F recently teamed up with the CME to offer direct access to each others’ trading platforms and products. That initiative will be launched in late September, and is expected to generate a significant pickup in volume for both.
Ratings Model for Caribbean Flawed: Scotia
The way in which sovereign risk is assessed for small countries like the Caribbean needs to be revised, according to Pablo Breard, Scotia’s head of international economic research. “I think the whole system for sovereign analytics – and that includes ratings – needs to be changed,” Breard tells LatinFinance. “The [small] size of these economies is one of their major structural vulnerabilities. You can’t apply the same model for debt sustainability for Turkey as you do for Jamaica.” A consequence of this is that small countries with lower ratings are unable to fund fiscal imbalances in international markets, and lack sufficiently liquid and developed local markets to do so. “That issue needs to be addressed,” says Breard, who adds that there is a need on the part of the sovereigns in the region for adjustment and belt-tightening going forward. “The favorable conditions for sovereigns to tap the debt markets are deteriorating,” he warns. Breard was speaking on the sidelines of a Euromoney/LatinFinance Caribbean Investment Forum in Trinidad last week.
Caribbean FinMins Pledge Discipline
The Caribbean’s finance ministers are pledging to ramp up their capital markets and be fiscally responsible. Trinidad’s Karen Nunez-Tesheira, called for greater integration with South America and pledged to raise the nation’s profile by making it an international financial center. Among several improvements the country is making to its capital markets are a new securities act and a new financial institutions act – both of which are set for consultation by congress, says Nunez-Tesheira. Broader enforcement and more rigid disclosure are also top priorities to increase transparency. Jamaican finance minister Audley Shaw pledges first and foremost to tackle debt reduction by seeking cheaper sources of financing. “We’re making a very aggressive pitch to multilaterals,” says Shaw, who notes 54% of Jamaica’s revenue goes toward debt service. He also embarked on a bid to make his country an international financial center. While acknowledging Jamaica’s weaknesses in education, crime and economic growth, he pledged intolerance against corruption and highlighted several legislation initiatives designed at eliminating money laundering and tax evasion. They were speaking at the Euromoney/LatinFinance Caribbean Investment Forum held in Trinidad last week.
I-Banks Sniff Post-Bear Caribbean Opportunity
Banking opportunities are emerging in the Caribbean following the collapse of Bear Stearns, home to Wall Street’s leading practice for the region. JPMorgan and Oppenheimer showcased new Bear Stearns hires at last week’s Euromoney/LatinFinance Caribbean Investment Forum in Port of Spain. These include some of the most specialized bankers and economists in the Caribbean. And Merrill Lynch, historically also a lesser-known institution in the region, tested the waters, bringing with it a troop of economists, salespeople and senior executives to flaunt its growing interest. Other members of the Bear diaspora who did not rejoin the sell side seem set on capitalizing on the vacuum they helped create, exploring investment opportunities for new funds. Meanwhile, top brass at veteran institution Scotiabank sought ingratiation by reminding delegates of the bank’s decades of commitment to the region. Local bank RBTT rebuffed that by claiming an even longer track record, though RBC is acquiring the 106-year-old institution.
Iberdrola Preps MXP3.5bn Debt
Iberdrola Finanzas, a unit of Spanish Utility Iberdrola, plans to launch this week a roadshow supporting the issue of up to MXP3.5bn in bonds. Iberdrola, which has a strong track record for developing power generation facilities in Mexico, is aiming for up to MXP1.5bn in 2018 fixed-rate bonds denominated in pesos or the UDI inflation-linked unit, and up to MXP2bn in floaters at a shorter tenor. Banamex and BBVA are managing the sale, expected to occur by the end of the month.
Caribbean Cautious as Conditions Worsen
As financing opportunities become increasingly sparse for many of the Caribbean’s biggest issuers – including sovereigns like Jamaica as well as innovative high-end real estate developer CapCana – a tone of caution and worry prevails. With a backdrop of high food, inflation and energy prices, the region’s disparate island nations are also confronted with declining tourism, rising financing costs, and in some cases, burdensome debt loads. “We should take on a different tenor and recognize that a crisis is coming,” says Gervase Warner, chairman of industrial conglomerate Neal & Massy Woodgroup. Speaking at last week’s Euromoney/LatinFinance Caribbean Investment Forum in Port of Spain, he characterized the state of affairs as a massive brewing storm. Bankers dedicated to the region dismiss this gloom and doom scenario and point to solid track records in debt repayment and, in the case of Trinidad, economic resilience thanks to oil and gas self-sufficiency.
CS Predicts Mexico Tightening
Credit Suisse is changing its view of Mexico rates, calling for a tightening because of inflation. “We are changing our call on monetary policy for Mexico for next week’s meeting. We now estimate that the central bank will tighten monetary policy by 25bp next Friday (20 June) to 7.75%,” says the shop. CS does not foresee the start of a tightening cycle but says future policy changes will continue to be data dependent.