Category: Peru

Peru’s government finds January to be an opportune moment for a bond sale, its Finance Minister Luis Valdivieso told a news conference Thursday, according to wire reports. The government is weighing the “liquid” investor books at the moment against financing costs, Valdivieso says, and is very close to making a decision regarding an issue. He adds that Peru does not need the cash, but the sovereign wants to take advantage of current market conditions. After meeting investors on several continents in December and January, the sovereign is expected to issue $600m-$1bn in new bonds, having stated a preference for a 30-year issue. New York DCM sources tell LatinFinance that a 10-year would be much more doable, and Peru might be hesitant following last week’s $1bn Brazil 10-year offering which, though successful, highlights difficulties with price discovery. Peru registered a $5bn shelf with the SEC on Monday. JPMorgan and Goldman Sachs managed Peru’s “non-deal” roadshow.

Peru has registered a shelf with the SEC to sell up to $5bn in debt securities. The document does not give any indication of when a first issue might come. After undertaking a non-deal road show in December and January with JPMorgan and Goldman Sachs, many in the market had thought a benchmark-size issue would follow recent benchmark issues from Mexico, Brazil, and Colombia. Peru’s finance minister has communicated that there is demand for at least $600m in dollar bonds, the amount bankers not on the roadshow expect the sovereign to target. In October, Peru was contemplating a 30-year cross-border bond issue of $400m-$600m, its first international foray since a $1.2bn sale of 6.55% 2037 bonds in March 2007 via Deutsche and Citi. DCM specialists say it will be lucky to get anywhere near 30 years in this market for size.

While economists agree that GDP growth in LatAm will slow down significantly, it may still fare better than the world as a whole. A report from Peru’s Banco de Credito notes that while it expects LatAm growth to slip to 2.2% in 2009 from 4.4% in 2008, the global economy will grow only 1.6% in 2009, down from 2.8% in 2008. “It could be said that the panorama for 2009 still looks quite manageable. However, depending on the magnitude of the international crisis, performance for the following years is still hard to predict,” says the bank. Citi’s forecasts are not as optimistic as BCP’s. Citi predicts global growth in 2009 of 0.5% and 1.6% in LatAm.

As expected, Peru has kept rates unchanged at 6.5%. Analysts had expected the move since inflation continues to be high at 6.65%, down only slightly from its November peak of 6.75%.

Pacific Credit Rating has maintained its A financial strength rating for Banco Santander Peru, citing the bank’s sound expense and investment policy, risk management, strength and experience at the parent company and its potential to grow through acquisitions. “The bank has not announced any concrete plans to make acquisitions, but it is able to buy smaller banks this year,” says analyst Eduardo Lora. It could buy banks that cater to individuals, to diversify away from corporate banking, where Lora says it has been focused.

Several companies operating in Peru have announced they are consolidating subsidiaries. In late December, Scotiabank notified Conasev of its plan to merge its Servicios, Cobranzas e Inversiones subsidiary with Recaudadora. Also, agricultural company Palmas del Espino has merged subsidiaries Industrias del Espino and Negociacion Agricola Ganadera Don Manolo. Industrias absorbed the second subsidiary effective January 1 and the company says the transaction will not entail any increase in capital, stock swaps or payments. In addition, December 24 Telefonica announced it was merging its Peruvian operations, Telefonica del Peru and Telefonica Moviles Peru, also known as MoviStar. Victor Miranda, an analyst with Pacific Credit Rating in Peru, says the move will make TdP the market leader in mobile communication, where Telefonica Moviles has a 60% share.

Fitch has assigned an A minus rating to a $150m MT100 from Peru’s Banco de Credito del Peru. The CCR Inc MT-100 Payment Rights Master Trust’s (CCR) 2008-B notes pay a floating coupon and come from a DPR program with approximately $1bn outstanding. The notes are backed by the collections generated from future and existing USD denominated DPRs originated by BCP. Coverage levels for the program are expected to be approximately 90x maximum quarterly debt service based on the recent volume of flows. “Fitch has stressed these coverage levels and believes that BCP’s current and future DPR business is adequate to support the rating of these future flow notes,” says the agency. BCP is the largest bank in Peru in terms of total assets, loans, deposits, and branch network. As of September, it had total assets of $20.8bn, or about 39% of the total banking system’s assets. Fitch rates BCP BBB minus with a positive outlook.

Scotiabank says it will seek approval from its board during its next shareholder meeting to invest about $100m in Peru for 2009 to strengthen its operations in the country. A source at the bank says the funds will come from dividends that will not be distributed to shareholders. He adds that specific investments have not been agreed upon yet, but that a part of the funds will be used to maintain a healthy level of reserves.

Peru is meeting investors on a non-deal roadshow in the US and Europe that precedes a Middle East and Asia tour scheduled to take place in January, a government source tells LatinFinance. The first round of meetings started last Wednesday and wrap up this Thursday. Besides finance minister Luis Valdivieso and central bank president Julio Velarde, investors in New York, Boston and London were also set to meet executives from BCP, Buenaventura and Grana y Montero. Bankers not running the meetings expect it to lead to an early 2009 sovereign bond issue attempt. JPMorgan and Goldman Sachs are behind the tour, and $600m is the targeted new cash raising, say bankers not involved. “This is a non-deal roadshow, we are not discussing any specific transaction,” says the government source. In October, Peru was contemplating a 30-year cross-border bond issue of $400m-$600m, the sovereign’s first international foray since a $1.2bn offering of 6.55% 2037 bonds in March 2007 via Deutsche and Citi. DCM specialists say it will be lucky to get anywhere near 30 years in this market for size. Investors are waiting for stability before buying and their extreme caution would have significant impact on tenor and spread. Peru has yet to name a new public credit executive director, following the late November resignation of Pablo Secada. The next most senior official in the department is Betty Sotelo Bazan, general director of the national department of public indebtedness. Meanwhile, the IMF late last week put out a bullish report on Peru following a visit to Lima. “The Peruvian economy is expected to be among the fastest growing economies in the world in 2009, with real GDP growth projected at 6%,” says the Fund. “With global price disinflation already underway, inflation should decelerate below 3% by end-2009,” it adds.

Norsemont Mining has notified Peru’s Conasev that it has hired Paradigm Capital to act as its exclusive financial advisor. Canada-based Paradigm’s hiring comes shortly after the miner received unsolicited expressions from third parties interested in buying it. Andrew Partington, a partner at Paradigm, tells LatinFinance that a timeframe has not yet been set as to when deal books will go out. Norsemont had already hired Fraser Milner Casgrain as legal counsel. Norsemont, which is based in Canada and operates the Constancia project in southern Peru, has a market cap of CAD103m.