Category: Peru

Peruvian insurer Pacifico Vida says in a letter to Conasev that its parent company Alico is separating from American International Group, its own parent company, and that it will become a standalone company. AIG had been trying to sell the life insurance unit, which has operations around the world. The unit generated $1.3bn in profit in 2008, according to company information.

Enersur, the Peruvian unit of GDF Suez, says it plans to acquire 100% of Quitaracsa, the company that owns the concession to develop the country’s Ancash hydroelectric project. Enersur does not disclose the price it will pay for Quitaracsa but the holdco’s previous owners, S&Z Consultores, estimate developing the project would cost $132m. A local energy sector analyst who asked not to be named notes Quitarasca does not have any income, since it only owns the concession for the unbuilt project, which is expected to eventually generate 115MW. Enersur is acquiring the project from Minera Atacocha, which holds a 92% stake, and from S&Z, which owns the remaining 8%. An Enersur spokeswoman declines to discuss the acquisition.

Peru’s Banco Interamericano de Finanzas (BIF) has joined IFC’s global trade finance program, the IFC says. “IFC’s support to BIF is in line with our strategy in Peru to improve access to finance for SMEs and to expand global trade opportunities for local firms, helping mitigate the impact of the financial crisis,” says Roberto Albisetti, IFC country manager for Colombia, Ecuador, Peru and Venezuela. BIF is the first Peruvian bank to join the program, which in LatAm includes 33 banks in 13 countries.

Canada’s Norsemont Mining says it has acquired some 1,443 hectares of land in Peru which will become part of its 4,000-hectare copper, silver and molybdenum Constancia project. It did not disclose how much it is paying for the land. The miner also says it has hired London-based Cutfield Freeman as financial advisor to work alongside Paradigm Capital, hired in December, to evaluate expressions of interest to acquire the company.

Peru saw monster demand for its first foreign bond sale in almost 2 years, fuelled by rising EM sentiment, scarcity value and a prudent tenor and concession. The sovereign priced late Wednesday $1bn in 2019 bonds at 99.500 with a 7.125% coupon, to yield 7.196%, or UST plus 437.5bp. Guidance was UST+450bp area, versus early whispers of mid-400s and the book was almost 5x oversubscribed, according to a banker on it. Bankers on and away from the transaction place the new issue premium at 45bp-50bp, based on an interpolation between where 2016s and 2025s traded the previous day. The BBB minus/Ba1 issue was heard trading up in the gray one point yesterday afternoon. “The new issue concession was appropriate and the 10-year is a good spot to get involved,” says West Coast-based EM fixed income investor. Another buysider notes scarcity and Peru’s relative attractiveness versus Mexico, Colombia and Brazil, as incentives to purchase. “The benefit is certainly the scarcity value,” says Siobhan Morden, LatAm debt strategist at RBS. She notes that Peru CDS had looked attractive versus the rest of region, at about 10bp inside Mexico before Wednesday’s issue was announced. Such euphoria exposes the sovereign to criticism that it came too cheap, but leaving a little money on the table seems prudent in such volatile times. “They might have been more aggressive on price, but caution is best in the current markets,” says a banker away from the deal. Goldman Sachs and JPMorgan managed the sale. Peru plans to use some of the proceeds for liability management, including the repurchase of 2014 global bonds, which it authorized Tuesday. Peru last came to the cross-border market in July 2007, with a PES4.75bn ($1.5bn) issue of 2037 sol-denominated bonds priced to yield 6.90%. Peru has meanwhile been speaking to the IMF regarding its flexible credit line, notes Goldman’s research shop, which expects Peru to qualify for the new facility.

Peru’s AC Capitales is weighing the creation of a new infrastructure fund, and is also in talks to sell a 29% stake in water utility Consorcio Agua Azul to Marubeni, according to investment director Alberto Camet. Camet tells LatinFinance that his shop is considering creating a second infrastructure fund with as much as $200m in equity. The shop’s current infrastructure fund is 62% invested. “We need to create a new one to be able to take advantage of investment opportunities that are being offered to us,” he explains, adding that the vehicle would invest in everything from roads to hydro plants. Camet expects local and foreign pension funds to invest. Peruvian funds are the largest participants in the shops’ three existing funds. Elsewhere, Camet confirms that Marubeni is performing due diligence with the intention of acquiring AC’s 20% stake in Consorcio Agua Azul. AC acquired the stake in late 2006 for $8.4m, according to Rayet, Rey, Cauvi, the shop’s legal advisor on the deal. AC has funds devoted to infrastructure, real estate and agro industry, each worth approximately $120m.

While most LatAm countries fall into recession, Peru is expected to see GDP grow by 4.5% this year, according to Credit Suisse, and 4.3% according to UBS Pactual. While this is not as high as in 2008, when Credit Suisse estimates the economy expanded 9.8%, it is still significantly higher than what is expected for the region as a whole. Credit Suisse also forecasts a 6% growth in private sector investment, down from 26% in 2008 and a 17% decline in the 2009 dollar value of exports, assuming that international prices for Peru’s commodity exports – gold, copper, zinc and fishmeal – stay near current levels for the rest of the year, and that export volumes are flat versus 2008.

Maple Energy has hired Netafim Peru for the engineering, procurement and construction of a drip irrigation system. Maple will pay Netafim about $22m for the project. The system will irrigate an 8,000-hectare sugarcane plantation in Peru. This deal, which is part of Maple Energy’s $222m ethanol project, is funded with cash on hand, says CEO Rex Canon. The whole ethanol project, he says, is financed with internal resources and project financing, but he declines to say from which banks. The ethanol project should be up and running in October 2010 and will produce 35m gallons of fuel-grade ethanol and 37MW of electric power, of which half will be used by Maple Energy and the rest sold to the national electricity grid.

JPMorgan is moving to neutral from underweight in its EMBIG model portfolio through adjustments that include raising Peru to overweight from neutral. Its portfolio beta rises to 0.99, although the shop also has a high cash balance at 10.4%. JPMorgan already moved Argentina and Venezuela to marketweight from underweight over the past 3 weeks. It meanwhile reduces holdings in very short-dated Mexican debt and rotated to longer-end bonds, but keeps the overall country exposure unchanged. “Our less bearish view on EM sovereign debt is because we believe that the likelihood of a sovereign default is very low, while the yield spread on the EMBIG to 3-month USD Libor has moved back to levels last seen in early 2003 (over 850bp, from a low of 120bp),” says JPMorgan. To raise Peru to overweight, the shop buys $0.5m of the 2025 bond at 101.00. It notes that although ‘33s look slightly cheaper on the curve, it is wary of the higher USD price. “We expect fundamentals to continue to justify the credit’s safe haven status,” says the shop. Peru has been a modest but reliable outperformer over both a year-to-date (+2.9% versus -1.3% for the EMBIG) and 12-month horizon (-2.4% versus -12.3%). JPMorgan sees growth dropping sharply from 9.8% in 2008 to 3.5% in 2009, but says Peru will still see the most resilient growth in the region this year. It also expects a very manageable 2009 fiscal deficit, at around 1% of GDP, notwithstanding a 3 percentage point GDP fiscal stimulus program. “Peru’s balance sheet also remains rock-solid: net public debt is only 12.3% of GDP – well below peers and just one-third the level of 2004. Moreover, the public sector is a net external creditor, with BCRP reserves of $31bn, not only well above the public sector external debt (less than $20bn), but nearly covering the country’s total external debt (public and private),” says JPMorgan.

Peru’s central bank has cut the monetary policy rate by 25bp to 6.0%, in line with consensus. The bank says inflation has declined for a fourth consecutive month, to stand at 5.49%, and should keep falling. It says inflation should reach the 2.0%-3.0% target by the end of the year. JPMorgan expected a 25bp cut, but believed the odds of a larger 50bp cut were possible given the rate of disinflation in February. Credit Suisse, which had initially expected the central bank to leave the rate unchanged, but later revised its forecast to a 25bp reduction, expects gradual easing to 5.0% by the year-end.