Despite a strong record of debt repayment, Jamaica says current bond spreads are too high for the sovereign risk. “We strongly believe that the cost of financing is more than it ought to be, even when objective factors are considered,” says Omar Davies, Jamaica’s minister of finance and planning. “Despite serious fiscal challenges, most of [the Caribbean countries] maintain excellent repayment records . . . But the international financial market place has not factored this element sufficiently into its pricing decisions,” says Davies. Though he praises international capital markets for relative speed and absence of conditionality, costs are too high, especially for long term infrastructure projects. “A concern to us in Jamaica, which is directly linked to the cost of financing, is the perception of risk in the region.” Small size, lack of diversity in the economy, exposure to natural disaster are the main issues, Davies adds. According to the minister, Jamaica saw 6% inflation and under 10% unemployment for the first time in 30 years in 2006. He is upbeat about the outlook for 2007, predicting 6%-7% inflation and 3% growth, with a decrease in debt. Davies does not expect disruption from the election. “There is absolutely no reason for any expectation of any change in the fundamental macro economic policies,” says Davies. He was speaking at the Caribbean Investment Forum in Montego Bay, a LatinFinance/Euromoney conference.
Category: Regions
Moody’s Assigns Aa1.mx Rating to State of Nayarit 300m Peso Loan
Moody’s has assigned Mexican national scale ratings of Aa1.mx and local-currency global scale ratings of Baa1 300m peso loan disbursed by Banorte to the government of the State of Nayarit in three installments in November and December 2006. The loan is governed by a loan contract and a separate trust agreement (Fideicomiso Bancomer F/47201-9), under which the state will pay debt service on the loan.
NGC Plans Return to Market
Trinidad and Tobago’s National Gas Company (NGC) is planning a return to the international markets, Daniel Sankar, vice president of finance and information management at NGC, tells LatinFinance. A $195m issue with a 15-year average life is expected to hit the market at the start of the third quarter. Sankar says he favors bond financing over the bank market and is mulling a reopening of a bond issued last year through Citi and Lehman. No mandate has yet been awarded.
T&T Gets Pitches, No Funding Planned
Trinidad and Tobago is getting pitches for external borrowing, but is not looking to issue any time soon. “We have been approached by many financial institutions,” says Janette Cupid-St. Hilaire, director of public sector finance at the T&T Ministry of Finance. “We do not need to borrow to maintain a presence in the market.” She adds that the sovereign will continue to refinance and that there are maturities in 2009, 2014 and 2020. T&T has been refinancing domestic debt in the local markets. “Borrowing at low interest rates encouraged more borrowing, and that exacerbated the debt problem,” says Cupid-St. Hilaire, speaking of international EM issuance in general.
Jindal Investment Not Affected By Mining Tax Increase
Bolivia’s plan to raise the rate of its mining tax, from 25% to 37.5%, announced by president Evo Morales on Sunday, will not affect the final details of the agreement with Indian firm Jindal Steel, according to mining minister Alberto Echazu. The minister said that the company had factored the planned increase into its negotiations with the government. Bolivia is still finalizing the grounds for Jindal’s planned development of the El Mutún iron ore deposits after awarding the firm the concession almost a year ago.
Colombia Issues $1bn In 2027 TES
Colombia has sold $1bn worth of global COP-denominated 2027 TES bonds to finance a tender for up to $950m in nine classes of fixed and floating rate bonds. The BB+ rated issue priced at par to yield 9.850%, which investors say comes at an attractive pickup to the interpolated curve. The 2015 global TES are trading at around 9.09%, implying that Colombia is paying 76bp for the extra 12 years. The differential between the two global maturities is wider than what is seen on the local curve, where the spread between the local TES 2009 and local TES 2020 is around 35bp. Orders for the bonds totaled $5.14bn. On Tuesday, the sovereign began accepting tenders for four classes of fixed rate notes with maturities ranging from 2008 to 2013 with coupons from 8.625% to 11.750%; and five classes of floating rate bonds due between 2009 and 2016 and coupons ranging from 8.700% to 10.750%. Citi and Deutsche Bank are leading the buyback and managed the sale of the 2027s.
Chinalco To Buy Peru Copper For $790m
China’s largest, state-owned aluminum producer, Chinalco, has agreed to pay C$6.60 per share for Vancouver-based Peru Copper in a deal worth $790m (C$840m). The Chinese producer will also make an initial purchase of 13 million shares, representing just under 10% of Peru Copper, worth C$70m or $C$5.30 per share to help finance exploration of the Toromocho project. The acquisition by Chinalco will help the government fuel China’s continued economic growth with the much needed supply of the raw material.
Bolivia Pays Petrobras $56m
Bolivia, via state-owned oil concern YPFB, has paid the first of two tranches of $56m to Petrobras in compensation for assets seized earlier this year. Last month, after much wrangling, Bolivia agreed to pay $112m to the Brazilian state-owned company in compensation for the two refineries ‘reclaimed’ as part of Bolivia’s hydrocarbons nationalization program. Petrobras bought the assets for $104m in 1999 from Bolivia’s YPFB as part of a privatization initiative.
ASUR Tries Again
ASUR, the Mexican airport holding company being acquired by its main shareholder Fernando Chico Pardo, is heard to be relaunching a 7-year $750m loan, part of which is to be denominated in pesos, after a first attempt in May failed to raise enough interest at the MLA level, according to a banker. The deal pays on a leverage grid: at up to and including 4.5x, the margin is 250bp and at 6.0x or more it pays 350bp. The bank meeting, which was originally scheduled for this week in Cancun, has been moved to the last week of June. Citi is leading.
Iusacell To Start Trading on Latibex Thursday
Mexican cell phone operator Grupo Iusacell is to start trading on European exchange Latibex Thursday. Last year Iusacell reached an agreement with creditors to restructure $750 million of debt, following protracted negotiations. Latibex is the Madrid-based index of Latin American stocks.