Category: Peru

Banco de Credito del Peru (BCP) is readying a benchmark-size 2020 bond. Peru’s largest bank, rated BBB/BBB minus, will meet investors in the US and UK Monday through Wednesday. Bank of America Merrill Lynch and Deutsche Bank are managing the sale, expected by the market to raise at least $500m. BCP’s last visit to the international DCM was a $250m 9.75% of 2069 hybrid, sold in November 2009, now trading around 7.0% yield-to-worst, according to Credit Suisse data. It is hoped that the deal would be the first of many before the end of the year offering investors diversification away from Brazil and Mexico.

S&P has revised the outlook on Peru’s BBB minus ratings to positive from stable. “Our positive outlook on the foreign currency ratings on Peru reflects the steady improvement in the country’s external indicators and government’s debt ratios,” S&P says. It adds that these improvements have been supported by low fiscal deficits and high economic growth with higher levels of investment and economic diversification. “We expect Peru’s net general government debt to reach 16% of GDP by year-end, half that of the BBB median,” S&P says. The agency expects Peru’s GDP to grow 7.5% in 2010.

Texas-based BPZ Energy plans on investing slightly more than $200m in Peru this year as it transitions from an exploration to a production company. The investment includes $180m in exploration for seismic testing and wells on 2 of its 4 blocks, plus $30m for a gas-to-power project that should be producing 135MW of thermal-generated energy by 2012. “We are an exploration company that has been producing oil for 2 years in a test phase, but will move to commercial production in the final quarter of this year,” BPZ president and CEO Manuel Zuniga tells LatinFinance. BPZ produced an average of 956 barrels/day from the Corvina field on its offshore Block Z-1 in June, according to the ministry of energy and mines. It expects to begin commercial production on a second field, Albacora, in 2011. Corvina has natural gas, but the company is not tapping into that deposit. US consulting firm Netherland & Sewell has certified 126m barrels of proven, probable and possible reserves on Block Z-1, but appraisals on different fields are still underway. BPZ holds the concessions to 3 onshore blocks, 19, 22 and 23, which, like Z-1, are located along the northern coast. The company is also in the process of completing the purchase, for $52m, of 3 GE generators that will be used in a 135MW thermal generating plant. The plan is to construct a 10 mile gas pipeline from Block Z-1 to the coast to generate energy. The full cost of the plan is $150m. Zuniga says the company is looking at senior debt financing for the rest of the project. “We are talking to local banks, international banks and multilaterals. The IFC owns 10% of the company, so it is a logical option for us,” says the official. “We are hoping to have the pieces of the puzzle in place by the end of the year,” he adds.

Peru’s central bank has tightened its monetary policy rate by 50bp, bringing it to 2.50%, more than expected by the market. Bulltick expected a 25bp hike, although it says that “economic growth has come roaring back and inflationary pressures are increasing.” Inflation in July rose 0.36% month over month, taking annual inflation to 1.83%, the shop adds. Barclays, which expected a 25bp increase, but did not rule out a larger 50bp hike, expects the rate to reach 4.00% in December and 5.00% in April 2011.

Peru’s central bank is expected to tighten its monetary policy rate by 25bp, increasing it to 2.25% today. “With economic growth significantly above potential and no signs of slowing yet, we expect the authorities to continue tightening monetary policy,” says Morgan Stanley. Peru’s central bank began hiking the rate in May, when it tightened it by 25bp to 1.50%. It has increased the rate by 25bp every month since then. Barclays Capital also believes there will be a 25bp hike, but cautions that a 50bp is also possible, citing strong growth in line with that previous to the global recession.

Peru has launched a domestic debt exchange that aims to push shorter-term bonds out to 2020. In an offer expiring today, the government is offering to repurchase 4 series of domestic bonds due 2011, 2012, 2016 and 2017, in exchange for up to PES3.27bn ($1.16bn) of its 2020 domestic bond. The latter was reopened at a price of 119.58, the finance ministry says. The sovereign has been active on the liability management front in 2010, highlighted by an April $1.8bn swap of dollar bonds maturing in the next few years for 2033 notes. There is no bank on the deal, as is common in Peru’s domestic exchanges.

London-based miner Nyrstar says it has acquired the Contonga and Pucarrajo mines in Peru for $23m cash plus $16m debt. The mines contain zinc, lead, silver, gold and copper deposits, the company says. Contonga processes about 660 tons of ore per day and Pucarrajo has the capacity to process about 1,100 tons per day, but has been shut down since June 2009 due to cash constraints, Nyrstar says. The buyer intends to ramp-up both operations to a combined capacity of more than 2,000 tons per day of ore by the end of 2012, resulting in annual production of approximately 40,000 tons of zinc in concentrate, 4,000 tons of lead in concentrate, 1,000 tons of copper in concentrate and 1.5m troy ounces of silver.