Ecuador may be considering a market-friendly solution to its impasse with debtholders, according to Bear Stearns. “We think that the conclusions of the debt commission that global bonds are illegal will be accepted by the government, yet the mechanisms for redress presented by the commission will most likely be market-friendly,” says a report issued by the shop. “This means that we think it is probable that the government will offer investors…the chance to swap their holdings at some point during the year.” As a result, Ecuador bonds remain attractive, says the shop, which tips the sovereign’s 2030s and 2012s. Local analysts appeared less sanguine on the potential for a deal. “The government does have money to pay [its] debt,” Eduardo Checa, CEO of Analytica Securities, tells LatinFinance. “But it needs to send the right messages to the international financial community.” Checa noted that the financial operators inside and outside the country are waiting to know more about what the new constitution will look like. “It’s all wait and see,” says the analyst.
Category: Regions
Mexico Agrees Cuba Debt Deal
Mexico has struck a deal to restructure $400m in debt it is owed from Cuba, according to local press and wire reports. The deal is a major step toward the normalization of commercial and financial relations between both countries, says AFP, which cites a statement from Bancomext. It allows Mexico and Cuba to “restore their historic level of economic collaboration,” says AFP, quoting Bancomext.
CIE Buys Back 2015 Bonds
Mexican entertainment company CIE closed Friday a buyback operation for outstanding 2015 bonds, with 93% of the securities tendered for cash and a premium. The company offered $1,025 per $1,000 in principal amount tendered. CIE will also pay a $30 premium for every $1,000 tendered before January 31. The 2015 notes had a coupon of 8.875%.
Mexico Keeps Rate Unchanged
Mexico’s central bank left untouched the 7.5% overnight rate for a fourth consecutive month, citing “deteriorating economical perspectives around the world”, especially in Japan, Europe and its main trading partner the US. The bank insists it will keep a “close look” at the risk balance sheet in order to maintain the goal of an inflation rate of 3% for 2008. John Welch, analyst at Lehman, says Mexican inflation is within the target band but there is pressure from food prices. “However, food price inflation has not yet translated into generalized inflation expectations,” he adds. “In all, we believe that today’s statement remains fully consistent with maintaining our forecast for the TdF at 7.50% throughout 2008,” says Goldman. “A deeper downturn with negative effects on growth in Mexico would tilt the balance of risks toward an easing.”
Peru’s Economy Booms
Peru’s GDP grew 8.99% in 2007, it highest rate in 13 years, the national statistics office reports. The expansion was fueled by a surge in the construction and manufacturing sectors, as well as mining, with its exports of copper, zinc and other minerals climbing due to rising prices of the commodities in the world market, expansion in the Asian markets and the continuation of APDEA. Fisheries and power generation also experienced significant growth. Inflation, on the other hand, was 0.24% in January, the institute reports.
Volkswagen Leasing Preps MXP Bonds
Mexico’s Volkswagen Leasing plans to sell up to MXP2bn in 2011 notes via ING and BBVA Bancomer. The exact sale date remains to be set, but it is expected this month. The AAA locally rated deal would be the second issue from a MXP10bn shelf.
Nymex Launches COP Futures Contract
Nymex plans to introduce a Colombian peso futures contract February 24, its first expansion into LatAm financial derivatives. It will trade and clear contracts developed by the Marco Polo Network platform. “It’s been a very active market, but underserved,” says Sergio Villamizar, head of derivatives at Marco Polo. “There’s a need for participants to hedge risk in it.” The aim is to provide a stable and regulated platform for COP, which participants have previously needed to rely on OTC trades for hedge. Villamizar says Marco Polo is working on launching other Nymex contracts for LatAm, declining to identify specifics. The Chicago Mercantile Exchange, in discussions to acquire Nymex, is also expanding in LatAm through a partnership with Brazil’s BM&F.
ICA Aqueduct Project Wraps Up Loan
A MXP1.7bn 18-year construction loan supporting the Acueducto II project in Queretaro, Mexico is set to close syndication shortly. Leads HSBC, NordLB and Santander have added Banorte and Banobras to the roster, with each bank taking an equal piece. Pricing is TIIE plus 250bp. Final close is expected within the next two weeks. Sponsors ICA, Fomento de Construcciones y Contratas of Spain and the Mexican unit of Mitsui will fund the remainder of the MXP2.85bn project with equity. The consortium began construction in December on the110km project supplying 50m cubic meters of water per year to the city from the Moctezuma River. It is expected to begin operation in early 2010.
Mexico Seen Holding on Rates
Mexico is expected to leave the overnight rate unchanged at 7.5% at Friday’s monetary policy announcement. Credit Suisse predicts that the central bank will use the same language when closing its policy statement, including a commitment to a 3.0% inflation target. “The central bank will address in its communiqué the worsening of the growth outlook for the US and the aggressive rate cuts by the US Federal Reserve,” says the shop.
S&P Sees Benefit of Mabe-GE JV
S&P has affirmed its BBB- (stable) long-term corporate credit rating on Mexico’s Controladora Mabe, citing the favorable credit effects of a joint venture with General Electric. The agency also laud’s Mabe’s leading position in Mexico, supported by “adequate operational performance,” as well as revenue and geographic diversification, increasing participation in the US and an important position in Canada. On the downside, S&P notes Mabe’s intense competition in its main markets, relatively high leverage, and somewhat aggressive expansion plans that could lead to higher debt levels. The agency says it might consider an upgrade if Mabe maintains total debt-to-Ebitda and funds from operations-to-total debt ratios of 1.7x and 30%, respectively, as well as positive free operating cash flow generation. A downgrade would follow if the company’s operational performance and strategies to enter new markets lead to a total debt-to-Ebitda ratio of 3.0x, S&P adds.