Category: Peru

The Peruvian government says it has selected Canada’s Brookfield Asset Management and locally owned AC Capitales to manage an infrastructure-focused private equity fund that aims to raise $500m. Brookfield and AC Capitales have committed $100m to the vehicle, says a Brookfield spokesman. Additional commitments are expected from the IDB and CAF. A first close, say the fund managers, is expected in early 2010.

Moody’s has placed Peru’s Ba1 bond rating on review for possible upgrade to reflect the sovereign’s track record of stable economic policymaking and reduced risks from the economy’s relatively high degree of dollarization. “The review reflects signs of increased shock-absorption capacity in the face of adverse external conditions,” said Mauro Leos, regional credit officer for LatAm. “The government’s enhanced policy flexibility is also evidenced by its successfully steering of the economy towards a ‘soft-landing’ after a period of above-trend growth,” he adds. The country’s Baa3/P-3 country ceilings for long- and short-term foreign currency debt and its Ba2 country ceiling for foreign currency deposits were also placed on review for possible upgrade. Moody’s last week upgraded Brazil to Baa3 from Ba1.

Fitch has upgraded Banco de Credito del Peru (BCP) to BBB from BBB minus to reflect the bank’s strong performance through the economic crisis. Fitch expects that the bank’s capital levels, which have strengthened as growth slows, should remain at levels somewhat higher than historically during periods of growth. In spite of a deteriorating economic backdrop, BCP managed to maintain a very good – albeit declining – asset quality and sustain adequate reserve coverage while achieving high profitability and strengthening its capital. The bank had ROAE of 26% and a ROAA of 2.0% as of June, says the ratings agency.

Peru’s central bank decided Thursday to keep its key interest rate at 1.25%, as was widely expected. The bank’s monetary policy committee explains a fall in inflation 1.87% in August from 6.65% in December is the primary driver behind the decision.

Peru’s central bank is expected to keep its monetary policy rate unchanged at 1.25% today. It has already cut 525bp so far this year, Morgan Stanley says, adding that annual inflation has slipped below the 2.00% target to 1.90% in August. Bulltick Capital says it expects a pause in the September meeting after a 75bp cut in August to see how the economy reacts to the rate cuts, the improving global environment and implementation of the fiscal stimulus. It adds there is a possibility of one more 25bp cut to bring the rate to 1.00% by year-end.

S&P has affirmed Peru’s BBB minus ratings and kept the outlook on the sovereign stable. “The ratings on Peru are supported by the government’s commitment to economic stability and a positive investment climate that will underpin solid growth through 2012, despite the sharp slowdown in 2009,” says S&P credit analyst Richard Francis. He says he expects Peru’s external indicators to remain robust, despite the fact that the current account balance swung to a deficit of 3.3% of GDP in 2008 and likely will remain in a deficit of 2%-3% of GDP through 2011. External debt net of liquid assets is expected to remain at less than 10% of current account receipts, compared with the BBB median ratio of 34%. “We expect gross external financing needs to current account receipts plus usable reserves to remain at less than 80%, well below the BBB median ratio of about 115%,” he adds.

Pesquera Diamante, among Peru’s top 4 fisheries by volume, is scheduled to be in New York today through Wednesday to meet with lenders. It is hoping to prepay an existing loan and raise a new facility with less restrictive covenants, says a banker who was invited to consider the new deal. It has mandated BBVA and Citi to lead the discussions with existing and new lenders. In August 2007, Diamante raised a $165m 5-year syndicated loan at Libor plus 350bp via Citi, with JPMorgan, BNP, BBVA and Santander as MLAs. It prepaid $80m of that loan in Q1, and will look to pay down the remainder of the facility this week, say bankers familiar with the process. It also wants to raise an $80m-$100m new loan with a less restrictive covenant package whose proceeds will be used to pay down what is left of the original facility and finance some of the company’s capex. A year ago, Diamante CEO Ricardo Bernales told LatinFinance his company would consider issuing bonds in the international markets to take out some of its debt. An IPO, possibly in Norway, was also an option being considered, he said. Diamante executives were not available for comment last week.

Peru’s central bank has cut its key interest rate by 75bp to 1.25%, a historic low. Consensus had pointed to a 50bp reduction. The bank, which has cut 525bp so far this year, says that the decision is driven by a more benign inflation environment. The inflation rate has dropped to 2.68% in July from 6.65% in December. The central bank says that it is likely it may not have to make any more cuts, but that this also depends on inflation trends going forward.

Peru’s Grupo Brescia, by far the country’s largest holding company, is heard to be taking its first steps to access the debt markets. The group, which owns significant stakes in 52 companies in South America, including Peru’s largest fishery, its largest tin mine, and a minority state in BBVA Continental, has no outstanding debt or equity securities in Peru or abroad. Last week it acquired Lafarge’s Chilean cement unit for $555m. It may use the acquisition as an opportunity put some debt on its balance sheet in a departure from its historical strategy of paying for all of its purchases with cash, according to bankers following the company. “This is a big opportunity for the banks,” says one Andean region banker. Celfin Capital, which advised Brescia on its acquisition of Lafarge, is heard to have arranged for BancoEstado to provide the group with a $180m 2-year loan, which would then be taken out in the Chilean bond market, say local bankers away from the proposal. High quality corporate names have issued at up to 20 years in Chile. Brescia is heard to still be entertaining pitches from banks as to what to do with its balance sheet and new acquisition financing. It has apparently already paid for the Lafarge asset in cash, but could still choose to raise debt in its place. Brescia, whose investments are controlled by its AESA unit, is said to be hiring finance executives to prepare for a more active financial management of its assets. A Brescia spokesman didn’t return calls seeking comment.