Category: Peru

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.”

As expected, Peru has held its benchmark lending rate at the record low of 1.25% for another month. “Leading economic indicators show clear signs of recovery and dynamism, without causing any short-term inflationary pressures,” the central bank says in a statement. February inflation was 0.3%, it notes. “The board is paying attention to inflation and its causes and will adopt, if necessary, preventative adjustments in monetary policy to guarantee that inflation stays within the target range.” Credit Suisse expects the central bank to leave the policy rate unchanged at the historically low level of 1.25% until mid-2010, as inflationary pressures remain low. “The central bank will likely continue intervening in the FX market as long as dollar inflows remain high,” it adds.

Peru’s Wong Group has sold the remaining stake it owns in Cencosud via a secondary offering on the Santiago stock exchange. The 2.3% stake, which Wong acquired through the sale of its supermarket chain to Cencosud in 2007, was sold for $201m equivalent. The company priced 49.8m shares late Monday at CLP2,053.00, a 3.6% discount to the previous session’s close of CLP2,130.50. The deal was 40% sold to international investors, according to a banker at a shop leading the deal, thanks to a strong effort to diversify the company’s investor base. The remainder went to local buyers. All told, the 144a secondary sale garnered a book of 2.5x the deal size. JPMorgan and LarrainVial led the offering, with both managing local and international distribution.