Category: Peru

Transportadora de Gas del Peru is set to sell up to $150m in bonds on the local market today. TGP will auction fixed rate and floating rate bonds linked to Libor, at a 15-year maturity featuring a 5-year grace period, according to an official at the company. Proceeds from the sale, rated AAA on a national scale, will help fund expansion and upgrade to TGP’s natural gas and liquid natural gas network. BCP is managing the sale, the first from a $400m shelf.

Peru power producer and distributor Maple Energy has signed a $140m senior secured debt financing with multilaterals and Interbank for a $254m ethanol project. Maple subsidiaries, Maple Ethanol and Maple Biocombustibles are the primary obligors for the $140m loan. It consists of a $65m senior secured construction and term loan from CAF, a $25m loan FMO and a $25m facility from the IDB, as well as $25m from Interbank. The loans from multilaterals are due 2022 and pay Libor plus 6% per annum, interest only for the first 30 months. The borrowers have the option to convert a portion of the loans from the IDB and FMO to fixed rate once during the term. After physical completion of the ethanol project, borrowers will also be required to make certain cash payments to the lenders in the form of cash sweep and upside interest payments. The cash sweep is a mandatory prepayment of the multilaterals’ loans at an amount equal to 30% of the borrowers’ cashflow available after debt service payments. In addition, borrowers will be required to pay upside interest of 6.5% of their cashflow available after debt service. Commitment fees are payable semi-annually, equal to 0.5% per annum of the undrawn amounts of the loans to multilaterals. The $25m Interbank loan due 2020 pays a fixed 10.75% per annum, interest only for the first 24 months, plus a 50bp annual of the undrawn amount commitment fee. The loan is in addition to equity contributions of $105.5m from Maple, including approximately $68.0m in capital contributed to date and a $8.5m facility primarily related to value-added taxes. The plant, on the northern coast of Peru, is scheduled to start commercial operations during Q2 2011.

Peru is looking to push out maturities through the launch of an exchange offer for $3.36bn equivalent in dollar and euro bonds. The offer expiring April 14 targets holders of the 9.125% of 2012 in dollars, 7.500% of 2014 in euros, 9.875% of 2015 in dollars and 8.375% of 2016 in dollars, according to a prospectus. Those accepting will have their choice of reopened 8.75% of 2033 dollar bonds, or cash. The sovereign has capped the cash payment at $500m, with disbursements prorated in the event the limit is exceeded. The exchange spreads and reopening spread for the 2033s will be assigned at the close of the offer, with results announced April 15. Barclays and HSBC are managing the sale.

In line with consensus, Peru’s central bank has kept rates on hold at 1.25%. Bulltick believes the rate will stay on hold until late in the third quarter. Morgan Stanley meanwhile expects the central bank to embark on a more aggressive monetary policy tightening campaign in the second half of the year, lifting the policy rate by 350bp to 4.75%.

Peru’s central bank is expected to keep rates on hold at 1.25% today, though consensus points to 200bp tightening, to 3.25%, by year-end. Bulltick believes the rate will stay on hold until late in the third quarter. The shop explains that inflation in March came in at a 0.28% monthly increase compared to February’s increase of 0.32% and is demonstrative of the lack of demand-led inflationary pressures as yet in the Peruvian economy. “This inflation number is further evidence that the central bank, contrary to much market speculation, will not be raising rates in the near term, but rather wait until for some meaningful increase in activity and inflation expectations before unwinding expansionary policy,” Bulltick says. Morgan Stanley meanwhile expects the central bank to embark on a more aggressive monetary policy tightening campaign in the second half of the year, lifting the policy rate by 350bp to 4.75%.

Thunderbird Resorts, a provider of branded casino and hospitality services, says it has recently sold a hotel in Peru for $8.4m. Proceeds were used to cut senior bank debt to around $19m and the company says it is looking to do a private equity offering for its Peru hotel, casino and slot parlor operations. If successful, it plans to establish all operations under a “to be formed” holding company. “This new structure calls for an equity investment sufficient to pay down a significant portion of the total debt on the Group’s casino and hotel properties in Peru,” it adds. It is also reviewing possible longer term refinancing scenarios as a possible solution to address short-term cash requirements. “The sale and refinancing efforts along with the equity raise will continue simultaneously,” says the group. Thunderbird had previously announced marketing to sell 4 of its 6 Thunderbird Hotels properties in Peru, including the one sold recently. The plan was to use the net sale proceeds to pay down the senior bank debt and other mezzanine debt, while not selling the 2 properties that include casinos. Thunderbird says that while efforts to sell 3 of the remaining 5 hotels continue, the offers it is receiving do not reflect the full valuation at operating levels. Thunderbird focuses on markets in Central and, South America, Southeast Asia and India.

Parque Arauco subsidiary Inmuebles Comerciales del Peru, is acquiring from Peruvian construction company Grana y Montero an 82.5% stake in Fashion Center, the company that owns the Fashion Mall Larcomar shopping center in Lima, for $36m in cash. The buyer says that the mall generated $5.7m in 2009 Ebitda. Parque Arauco, a Chilean mall owner and developer, plans to take over 100% of Fashion Center from other minority shareholders. Closing is expected in May.

Peru is assessing market conditions with the aim of increasing stability and improving the yield curve for foreign investors, Peruvian finance minister Mercedes Araoz tells LatinFinance. “We’re using bond issues, for example in local currency, to finance our public investment plan,” she adds. Araoz says financing has been done longer than 32 years at attractive rates. “Part of our policy is to have good liability management,” she adds. “We need to minimize long term risks.”