Colombia’s government moved to stem inflation on Monday by raising commercial banks’ reserves on customers’ deposits, which in turn will curb retail lending. The banks will now have to send 27% of new checking account deposits, 12.5% of savings accounts and 5% on CDs with maturities less than 18 months, up from levels of 13%, 6% and 2.5% before. In another measure aimed at damping down the economy, the Bank is imposing a 40% deposit requirement on all corporate and government external borrowing to slow down the inflow of dollars.
Category: Regions
Posted inDaily Brief
Suramericana Struggles
In another sign that the bank market may be turning against borrowers – albeit only slightly – a deal for Suramericana de Inversiones is faltering. The Colombian investment company that owns shares in Bancolombia and Grupo Nacional de Chocolates is struggling to raise a $150m 3-year loan. The facility, described as a holding company deal backed by shares, launched at 75bp over Libor, a price many non-participants said was too tight. That figure could still be adjusted, say bankers. The deal went out to MLAs at the start of April and was expected to be completed by May. But as of Monday, lead arranger Citi still had the books open. Competing bids for the mandate are heard to have come in at between 5bp-30bp wide to the 75bp level.
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Crime Hinders Caribbean Development
A recent World Bank report finds that high levels of crime and violence threaten Caribbean growth and prosperity. In many countries, as crime increases, access to financing declines; spending on formal and informal security measures increases; and worker productivity drops. Reducing the homicide rate in the Caribbean by one third could more than double the region’s rate of per capita economic growth, the report estimates. Drug trafficking has driven murder rates in the Caribbean to the highest per capita in the world, and assault rates are significantly above the world average.
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Ecuador Looks at Financial Sector
Meanwhile, in Ecuador, President Rafael Correa, has warned financial institutions that he will intervene if they do not bring down the level of interest rates used. Correa said he will use the courts if necessary to achieve his aim
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Colombia Raises Funds for Buyback
Colombia has sold $1.12bn worth of new peso-denominated bonds to fund the buyback of existing debt. The new TES bonds, maturing in 2009 and 2023, will mostly pay fixed rates of between 9.80% and 10.35%.
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Isagen Sale First-round Brings In $229m
Colombia’s government has pulled in $229m (473m pesos) from the first round of its privatization of power generator Isagen, which it put on the block for the country’s “social groups” at the end of February, in accordance with Colombia’s privatization laws. The government is hoping to capture around $262 million via the IPO of 20%, or 2.44 million shares, of Isagen, more than double its original estimate. It had set a minimum price per share of 1,130 pesos ($0.50). A second round of the share sale will open on June 2 and will be open to local and foreign investors alike.
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VW to Launch Mexican Bank
The Mexican subsidiary of German car manufacturer Volkswagen is planning to launch a bank in Mexico although it has yet to lodge a formal request for authorization. The proposal to launch a bank follows recent moves by local retailers to open up their own banking units and stimulate competition.
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EEB Takeout Bonds Coming In June
Colombia’s EEB is expected to come to market with $1.1bn or more in dollar-denominated bonds in June, Jorge Barragan, the company’s CFO, tells LatinFinance. The company took out a 9-month $1.46bn loan led by ABN AMRO earlier this year to acquire Ecogas. While most of the takeout will take place in the bond market, some of the bridge financing will also be syndicated, says Barragan. The Dutch bank is sole lead.
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America Movil Treasurer Urges Domestic Reform
Ricardo Rivera, treasurer of LatAm wireless operator América Móvil, urges local regulators in LatAm debt markets to follow Peru and Mexico’s example and allow domestic investors to buy the debt of foreign companies invested in their countries. Rivera told panelists at Labif, “We have seen a lot of [local] investors that want to hold paper of other Latin American names and for regulatory reasons often can’t.” As companies pan out across the region, they are increasingly motivated to fund themselves in the currency of the countries where they have operations, says Rivera. “As an investor in other countries, issuing debt is another natural hedge for your investment and very attractive for corporates like us as a source of funding. “América Móvil has issued at attractive rates in Mexico, Peru and Colombia, but was frustrated by an attempt in Chile. “We found that between the different regulatory entities for pension funds, the Central Bank and the Ministry of Finance, there was not much coordination, which is fundamental for any kind of development to be done.” Rivera notes that Mexico’s corporate debt market has grown exponentially since allowing foreign companies to issue debt in there.
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BBVA Bancomer Preps $1.1bn+ Hybrid
Mexico’s BBVA Bancomer, owned by Spanish bank BBVA, is preparing to issue $500m worth of Tier I notes, (A1/BBB+) and upwards of €500m in Tier II notes. The Tier I notes are non-cumulative subordinated and non-preferred 15 non-call 10, due 2022 and callable in 2017 and thereafter. In year 10 they switch to floating rate and step up 100bp from the price to be determined next week. The Tier II notes are cumulative fixed-to-floating rate subordinated preferred 10 non-call 5 notes due 2017 and callable in 2012. Two simultaneous roadshows will kick off Monday and pricing may come Thursday. Credit Suisse, BBVA Securities and Deutsche Bank are joint-leads.