S&P does not expect Mexico’s sovereign ratings to be affected by the downturn in the US and the resulting deceleration in GDP growth in Mexico. “The combination of macroeconomic stability, the development of domestic capital markets, and the timely approval of tax reform in 2007 should sustain market confidence and the current sovereign ratings during a period of sluggish economic growth in 2008,” says analyst Joydeep Mukherji. S&P expects Mexican GDP growth to decline to 2%-3% in 2008, depending upon the extent of the downturn in the US. Domestic demand should continue to spur the economy in 2008, even as net exports suffer due to US. FDI should also boost overall investment, even if it declines from the $23bn influx received in 2007, the second highest level received in Mexican history.
Category: Regions
Citi Tips Mexico’s PASA
Citi has upgraded Mexico’s Promotora Ambiental (PASA) to buy/speculative risk from hold/speculative risk, but lowered the target price to MXP46 from MXP47 a share. Upside potential comes from Promotora’s good results, reactivation in waste management concession bids and a solid CAGR in PASAS’ Ebitda during the next three years of 23%, versus 6% in its international peers, says Citi. The shop also cites good potential in services to Pemex and a 21% correction in the stock during the last four months. The 2008-2010 projections contemplate CAGR of 15% in sales, 23% in Ebitda and 50% in net income, according to the bank. “PASA’s strong balance sheet and its core business, waste management (counter-cyclical industry), should allow the company to meet its growth targets during the year, if a more complicated economic environment in Mexico develops,” the shop says.
IFC Commits $22.5m to Mexican Developer
The IFC has made its first ever housing development investment by taking a 10.6% stake in Vinte, a Mexican low income housing developer, for $10m. The multilateral also lent Vinte $12.5m through a 7-year revolving credit line. “We originally started in this sector by helping Sofoles with capital market financings,” Marcos Brujis, IFC Senior Manager for Mexico and Central America, tells LatinFinance. “The next stage in our strategy is financing directly the construction sector, which involves a greater risk than our previous financings.” Vinte, a privately held company, caught the eye of the IFC for its environmentally and socially sustainable practices that include strict standards on use of neighborhood space, efficient water and energy usage technology and hi-tech communication facilities within the homes. The IFC seeks to provide financing to companies that lack access to the bank and capital markets.
Asian Bidders Win Mexico LNG Mandate
Mitsui, Samsung and Korea Gas have won a $900m mandate to build an LNG receiving terminal from Mexico’s Comision Federal de Electricidad, says Mitsui. The three partners will build and own the terminal at Manzanillo on the Pacific coast, and provide natural gas to the CFE for 20 years once operations start in 2011. Mitsui and Samsung will each have a 37.5% stake in the project and Korea Gas will hold the remaining 25.0%. The 14m cubic meters per day facility will consist of two LNG tanks, a regasifaction facility and a pier.
Chadbourne Buys Thatcher Team
Five attorneys with experience across LatAm will join law firm Chadbourne & Parke as partners in New York and Mexico City. Marc Rossell, Oliver Armas, Boris Otto, Luis Enrique Graham and Jose Antonio Chavez are moving over from Thatcher Proffitt & Wood. Chadbourne plans to open an office in Mexico City, the firm’s first office in LatAm. “We are considering opening an office in Brazil but there is nothing definitive,” Blum adds.
Peru Pays Down Brady Debt
Peru followed through with plans to pay down $838m worth of Brady debt Friday. The sovereign eliminated its outstanding amounts FLIRBs, PDIs and Discount bonds, Jose Miguel Ugarte, head of public credit, tells LatinFinance. Peru used $685m worth of proceeds from peso-denominated sovereign issuances at the end of last year to pay down the notes at par. It also used $153m from the Treasury to pay the balance, says Ugarte. The process eliminates virtually all of Peru’s Brady debt. The country still has about $50m in Par bonds that are trading at 85, which it chose not to call. Having received news of the plans to pay down the debt earlier this year, markets didn’t react to the move Friday, says one Andean strategist. The strategist notes that in general, however, the move is a welcome development that is part of Peru’s overall positive story.
LatAm Equity Sinks
LatAm equity funds lost 5.70% in the week ended March 6, according to Lipper. The drop was less severe than that of China Region funds, which lost 6.81%. EM Equity funds fell 4.96% in the same period. LatAm underperformed the World Equity funds group, which, as a whole, had an average loss of 3.97%. Only two fund groups registered positive returns last week, according to Lipper. US Dedicated Short Bias funds rose 6.79%, while Gold Oriented funds climbed 0.52%.
Scotiabank Targets $200m Syndication
Peru’s Scotiabank is looking to raise $200m through a 5-year amortizing loan. The deal through Citi includes a 2-year grace period with seven ensuing semi-annual installments. The margin is heard at 120bp over Libor, say bankers away from the deal. The deal was launched the same day Peru’s Interbank announced a $200m 3-year step up loan via Standard Chartered. That deal will offer Libor plus 80bp in year one, 85bp in year two and 95bp in year three. Earlier this year, Banco de Credito del Peru raised $410m in an upsized and repriced 3-year step up loan at 70bp, 75bp and 85bp over Libor.
Mexico Readies Airport Auction
An auction for the concession of Mexico’s Maya Riviera airport will likely take place in the coming months, according to Federico Patiño, deputy general director at Mexico’s Nacional Financiera. “We will be in the market for Maya Riviera very soon,” Patiño told LatinFinance on the sidelines of a US-Mexico Chamber of Commerce event Friday in New York. Patiño and Oscar de Buen, deputy secretary for infrastructure, are on tour to sell Calderon’s five-year infrastructure plan. Patiño said the auction for Maya Riviera will be awarded to the bidder that offers passengers and airlines the lowest tariffs. Mexican airport executives LatinFinance spoke to earlier this year say the airport project could cost $200m. Separately, De Buen declined to elaborate on the plans for location and timing of a second Mexico City-area airport, saying only that the government is still studying the situation. That project would likely cost between $3bn and $6bn, say airport executives. The two airports are among some $68bn in projects being supported by the Fonadin infrastructure fund that should eventually reach $27bn, says Patiño. Other infrastructure projects on the way include the FARAC II toll road concession that could reach $2bn, and the $8bn Punta Colonet seaport in Baja California.
Nexxus Capital Closes $142m Fund
Nexxus Capital, the Mexico-based private equity shop, has closed its Nexxus III fund with a total investment of $142m, according to Roberto Terrazas, director of Nexxus Capital. Main investors include IFC, CDC, HSBC, Export Development Canada and CMIC. The fund aims to invest in medium-size companies in Mexico, with sales of $50m-$500m, Terrazas tells LatinFinance. The investments made by Nexxus III will focus on companies that cater to the Mexican middle class in sectors like health, education, consumer goods, retail, tourism, finance and housing. The fund plans to make investments of $20m-$50m, Terrazas says.