An International Chamber of Commerce (ICC) arbitration panel has ruled that Venezuela owes ExxonMobil $907.6m for the assets it took from the oil major in a nationalization drive four years ago. The ruling orders state-owned PDVSA to compensate Exxon, but the Venezuelan oil company will end up paying roughly $255m after taking several deductions. PDVSA will first deduct $191m that Exxon owed in connection with outstanding debt of the nationalized Cerro Negro project, an additional $300m that Exxon managed to freeze in a PDVSA account in New York, and $160m that the tribunal credited to PDVSA, the Venezuelan company says. Exxon officials could not immediately comment. The ruling came far below the $7bn-$10bb that Exxon originally sought as compensation for its nationalized assets. The final outcome for the compensation fight is yet to be decided, however, as Exxon has a pending arbitration case against Venezuela at ICSID, the arbitration unit of the World Bank. Since it took over the assets of foreign oil companies along the Orinoco river belt, PDVSA has argued it would pay only the book value of those assets and not the fair market value that the aggrieved oil companies sought to receive. The ruling comes at a time when Venezuela has stepped up its settlement of pending nationalization compensation payments to affected companies, including Mexican cement maker Cemex and Colombia’s retail chain Exito.
Category: United States
Santander Makes New York Cuts
Santander was heard laying off some 15 people in its New York offices in December, including Marcia Vorona, an executive director in the LatAm structured finance group. Vorona joined Santander from ABN Amro in late 2008 after an RBS-led consortium took over the Dutch bank. This follows a series of LatAm cuts at other European institutions such as ING and RBS as they move to comply with Basel III rules and set aside more money for capital requirements to protect against the continent’s ongoing debt crisis.
Vitro Restructuring Faces Court Order
A New York Court has slapped a temporary restraining order on Mexico’s Vitro, preventing its subsidiaries from approving a controversial $3.6bn debt restructuring plan that has irked foreign bond holders. Judge Bernard Fried, of the NY State Supreme Court, has ordered Vitro subsidiaries to “withdraw their consent” to the plan. Under the restructuring, Vitro would relieve its subsidiaries of serving as guarantees for outstanding debt. Vitro plans to appeal the ruling, Roberto Riva Palacio, a Vitro spokesman, tells Latin Finance. Riva Palacio points out that Vitro’s legal team set up a Monday hearing with Federal Bankruptcy Judge Harlin D. Hale who approved Vitro’s Chapter 15 filing, to request a stay of this order. Riva Palacio could not immediately comment on what the standing restraining order means for the already-approved restructuring plan. The glassmaker used roughly $1.9bn in intercompany debt to give it enough voting power to approve what was largely an unpopular restructuring plan for other creditors. As it stands, the company’s restructuring proposal includes $814.7m in new 2019 bonds, a fee of up to $32.7m and mandatory convertible debt of $95.8m. JPMorgan has estimated that creditors who accept the deal may recover between 48 and 60 cents on the dollar, depending on the level of debt-holder support. Vitro’s move has aggrieved bondholders and caused other investors to worry about the repercussions that a successful restructuring such as Vitro’s could mean for Mexican debt investors in the future.
ING Sheds LatAm Jobs
ING has shed jobs across its LatAm trading, research and DCM groups as the bank moves to comply with Basel III rules and set aside money for capital requirements, says a person with knowledge of the situation. Approximately 20 odd employees are heard being let go in New York and to a lesser extend in Mexico. While the cuts are seen reflecting the diminishing importance of LatAm for the Dutch bank, ING isn’t retrenching altogether. It has kept some research, sales and some DCM people on board, including some in Brazil, and will continue to focus on local currency and interest rate products in LatAm. Its EM hard currency business, however, is being abandoned.
El Paso Aims for 1Q Brazil Asset Sale
US gas company El Paso is expected to divest its Brazilian assets, along with the rest of its exploration and production business, by the end of the first quarter of 2012, says a person close to the transaction. Since the acquisition of El Paso by Kinder Morgan earlier this year, the pipeline company has been hawking its global E&P business in a sale that analysts estimate at $8bn. The bulk of the assets are the company’s US shale plays, but roughly 3% of the company’s total consolidated reserves, as measured in millions of cubic feet of natural gas equivalent, are located in Brazil, according to the company’s latest 10K filing. “The process is ongoing,” Bill Baerg, investor relations manager for El Paso, tells LatinFinance, referring to the sale. Baerg says the company plans to sell the bulk of its assets in one transaction but will have to seek different buyers if one single transaction is not viable. The company has retained Barclays and Evercore, the same firms that advised in Kinder Morgan’s $21.2bn acquisition of El Paso agreed in October. In Brazil, El Paso owns a 100% working interest in the offshore Pinauna and Camarao fields, a 25% stake in the Camarupim field and 35% stake in the Pescada-Arabaiana fields.
US Operator Buys Telefonica Mexico Towers
American Tower, a US operator of telecommunications towers and sites, has agreed to acquire 2,500 telecom towers in Mexico from Pegaso PCS, the Mexican subsidiary of Spain’s Telefonica, for $500m. Neither party involved in the deal hired financial advisors, and American Tower used its own in-house M&A group, say a spokeswoman for American Tower. Stearns declined to provide any valuation multiples for the purchase. The company said in a statement that the tower acquisition doubled its portfolio of assets in Mexico, a bet on the future growth of the telecom business in that country.
Batista Adds to Sport Entertainment JV
Brazil’s EBX and global sports and media company IMG Worldwide have purchased sports agency Brasil 1 Sports and Entertainment for their recently created entertainment joint venture IMX. The holdco for Brazilian billionaire Eike Batista’s group of companies, signed a 50-50 joint venture with IMG in November with the aim of turning it into the leading sports, entertainment and arena company in the country. The IMX venture’s portfolio of projects includes the Volvo Ocean Race, the LPGA Brazil Cup, the Travessia dos Fortes open water marathon and the Ultimate Fighting Championship. A spokesman for EBX could offer no valuation details of the transaction and said the total amount paid for Brasil 1 will remain confidential. He could not immediately say if the partners used any financial advisors.
Delta Takes Gol Stake
Delta Airlines has agreed to acquire a minority stake in Brazil’s Gol Linhas Aereas Inteligentes for $100m, in a deal that may cause some Gol shareholder dilution. The US carrier is expected to pay $100m for preferred shares in the hands of controlling shareholders at a rate of BRL22.00 ($12.25) per ADS, Gol says. The stake is estimated to be about 2.9%, Citi says in a report. As part of the deal, the controlling shareholders will issue new ADS in a capital increase of BRL280m, and Delta will receive a seat on the board of the low cost Brazilian carrier. The deal came at a 53% premium over Gol’s Tuesday close, noted a person close to the transaction. Morgan Stanley and law firm Milbank, Tweed, Hadley & McCoy advised Gol. Executives at Gol told analysts in a conference call that the transaction will lead to synergies but they would not yet quantify these. Some observers expressed reservations about what the deal would mean for Gol’s minority shareholders. “We are concerned that the controlling shareholders are selling a position in the company at a bid premium versus Tuesday’s close…Preferred shareholders will get a much better deal, versus the dilution faced by minority shareholders, once the capital increase occurs,” Citi says. Gol shares closed Wednesday at BRL15.59.
NII Draws Large High-Yield Crowd
NII retapped its existing 7.625% 2021 bonds for $700m, upsizing from an original $500m size. The US-based operator of LatAm wireless assets, reopened the bonds at 98.50 to yield 7.852% or UST+600bp, in line with 98.50-area guidance. Order books came in excess of $1.4bn from a predominantly high yield focused audience. Proceeds are for general corporate purposes. Credit Suisse, Deutsche Bank, Goldman Sachs and JPMorgan led the B2/B+ transaction, done through the NII Capital unit. In the original transaction priced in March, NII issued $750m of the bonds to yield 7.625%, through Goldman Sachs, Credit Suisse, Deutsche Bank, JPMorgan and Morgan Stanley. NII is a provider of fully-integrated mobile communication services in Latin America.
BPZ Set for Lima Listing
BPZ Resources, the US-based E&P company operating in Peru and Ecuador, has been approved to list on the Lima Stock exchange. The timing remains to be determined. BPZ does not announce any new equity capital to be raised in Peru.