Colombian retailer Almacenes Éxito has raised $392m in a 144a/Reg S privately placed global depositary receipt program in the US. It became the first Colombian company to do a primary offer outside its home market in 10 years, according to JPMorgan, which is managing Éxito’s GDR program. “After a 10-year period, Colombian companies are once again looking to access capital markets outside of their borders,” says Claudine Gallagher, global head of JPMorgan’s depositary receipts group. DRs represent ownership in foreign corporations and typically trade on the US and/or European markets and settle in accordance with those market standards. Éxito’s stores sell consumer products, fresh products, apparel, home products and entertainment items.
Category: Regions
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China to Set up Costa Rica Office
China, which is duking it out with Taiwan for control in Central America, plans to set up a representative office in Costa Rica by the end of 2007. With a presence on the ground, China’s Council for the Promotion of International Trade aims to boost trade relations between China and Costa Rica, as well as in communications between entrepreneurs of the two countries. A Chinese commercial delegation is in San Jose this week. The two countries established diplomatic ties June 1. According to China’s General Administration of Customs, trade between China and Costa Rica was $2.1bn in 2006, up 87% from 2005. Volume rose 65% rise in the first half of this year, according to the Chinese government’s website.
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Alcoa Declares Force Majeure in Jamaica
Alcoa has halted production at its 1.4m ton Jamalco alumina refinery in Clarendon, Jamaica to assesses damage caused by Hurricane Dean. “In light of the temporary shutdown of the facility, damage to the port, and likely resulting delays in shipments, the company has declared force majeure to its customers,” says the firm. It adds that the port from which Jamalco ships alumina sustained substantial damage in the storm, while the bauxite mine and refinery lost power. Alcoa temporarily curtailed production at the refinery last Saturday as a safety measure in advance of the hurricane. Jamalco is 45% owned by the Government of Jamaica.
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Jamaica Delays Election Date on Hurricane Damage
Jamaica has reportedly delayed its general election to September 3 from August 27 because of damage caused by Hurricane Dean. Prime Minister Portia Simpson Miller was generally expected to win re-election. The premiership comes with the poisoned chalice of chronic fiscal problems, rising unemployment and a growing wave of violent crime in the Caribbean’s most populous English-speaking nation.
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LatAm Banks Not Exposed To Subprime, Says Fitch
Banks in Latin America and the Caribbean have minimal or nonexistent exposure to US subprime securities and as a result will likely weather this downturn with relative ease, according to Fitch. “Securities portfolios in the region continue to be concentrated in instruments issued by the holders’ local governments,” and any other holdings tend to be of higher quality instruments, says the report. As a result there should be no change in the credit ratings. However the mark to market of these holdings could depress earnings at insurance companies and banks. The reduced availability of cross border capital markets financing – a number of issues have been pulled or postponed – may also have an effect, says the report. Most of the funding for banks comes from local markets, notes Fitch, adding it is comfortable with the ability to refinance in the coming months.
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Wrapped Deals Widen On Monoline Concerns
Investors and bankers in Mexico say a good part of the widening in spreads on structured bonds that are insured by monoline wraps is due to investor concern over the deteriorating credit quality of the insurers themselves. Issues by Sofoles Su Casita, Patrimonio and GMAC that have come to market in the past six months are feeling the impact of contagion from the US mortgage crisis as well as the stigma of having bonds insured by wrappers like MBIA and Ambac, says a local banker. Su Casita’s March cross-border issuance of $232m in RMBS, the senior class of which was wrapped to obtain a AAA rating, has widened out to around 40bp over Libor from 23bp at issuance, according to a banker away from the deal. GMAC’s $121m AAA July deal has widened to 63bp from 56bp over UDI, and Patrimonio’s Aaa July MXP400m issuance in RMBS was trading 60bp wide of the 10-year MBono, from 46bp over at issuance. A monoline executive says that while some locals may see the widening as a result of concerns over the wraps, pricing in these very thin markets is not necessarily indicative.
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Panama Growth Seen Exceeding 8.1%
In an upbeat assessment of Panama, Moody’s predicts growth will this year exceed the 8.1% seen in 2006. “The country’s Ba1 foreign currency government bond rating and stable outlook are supported by a dynamic service sector that has served to shield the economy from the volatility observed in other countries in the region, and by a favorable debt profile,” says the agency. “The strong performance of services’ exports (including tourism), domestic consumption and investment activity, in preparation of the Panama Canal expansion, are key contributors to such growth,” adds Moody’s vp Alessandra Alecci. However, she warns that a severe downturn in global conditions would pose significant challenges. The non-financial public sector deficit last year posted its first surplus in 10 years, driven by revenues benefiting from the 2005 tax reform. Total public sector debt to GDP dropped to 61% in 2006, down from 70% in 2004. “While the ratio should further decline in 2007, in nominal terms, the stock should remain constant,” predicts Alecci, adding that social and infrastructure expenditures take priority over aggressively reducing the debt burden.
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JPM Sells Strength, Cuts Colombia Exposure
JPMorgan this week cut its exposure to Colombia debt to underweight from neutral as part of an overall reduction in EM fixed income investment. It sold a million sovereign 2024s at 112. Colombia looks rich relative to BB credits and year-to-date it has outperformed the EMBIG (+0.7%ytd versus -1.2% return in the EMBIG). “Colombia’s fundamentals are strong but less robust than other Latin peers as it will post a current account deficit of around 3% of GDP,” says JPM. “Moreover, external accounts are exposed to a potential decline in commodity prices and the likely reduction of FDI inflows in a context of tighter global liquidity,” it adds. Colombia will also be impacted by rising borrowing costs since a large fiscal deficit will force the government to rely heavily on the domestic and external markets. Overall, JPM took advantage of a rebound in EM to cut exposure in its EMBIG model portfolio. “While we see the EMBIG above 200bp as cheap on a fundamental basis, we reckon that spreads can widen further before conditions in global financial markets stabilize and the EMBIG drops to below this level,” says JPM.
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Televisa Buys Argentine Magazine Publisher
Mexico’s Televisa said Monday it agreed to buy all of the shares of Argentina’s Editorial Atlantida for an undisclosed amount. News reports earlier in the year valued the company at $60m, according to Reuters. The acquisition announcement sent to the Mexican exchange also said Atlantida’s founder, Constancio Vigil, will join Editorial Televisa’s board.
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Analysts Predict Colombia Rates Rise
Analysts are predicting another 25bp rate hike this week in Colombia. BBVA says the rate needs to move to 9.50% Friday, from 9.25%, owing to inflation, the threat to FDI from global credit pressures, and COP weakness. If it does not raise rates, BBVA warns of further peso vulnerability. However, Merrill Lynch goes against consensus, saying the Banco de la Republica will keep the reference rate at 9.25%. “The case for a pause has focused on the risk of overdoing a – to date 325bp – tightening, whose impact operates with a lag. This view points to the fact that there is already evidence that some of the impact from past measures is being reflected in slower monetary aggregates and credit expansion and higher market interest rates,” says Merrill. However, it says that if rates are frozen, minutes due two weeks after the meeting may not clarify whether the tightening cycle is over, or if there is just a technical pause.