Grupo Silvio Santos will likely need to sell significant assets to repay a BRL2.5bn loan it took to shore up Banco Panamericano, according to Fitch. The comments by the ratings agency are echoed by Henrique Meirelles, president of Brazil’s central bank, who says the holding company may sell off its stake in the Brazilian lender. Santos has issued a statement saying it does not intend to sell its stake in Panamericano, though Fitch points out the holding company has other assets it could sell to pay down the loan. Eike Batista has reportedly said that he would be interested in acquiring assets held by the Santos group. According to Fitch “the sale of significant assets will be necessary for the group to face its financial obligations.” Santos also owns a controlling stake in SBT, a Brazilian television network, along with several other interests. If Santos were to attempt to sell the Panamerican stake, it may need to look outside of Brazil for a buyer. According to a Fitch analyst, several of the larger Brazilian banks already have access to Panamericano’s market, which includes the vehicle, payroll discounted and consumer loans segments. Fitch downgraded Panamericano’s national long-term ratings to A- from AA+ with negative watch.
Category: Structured Finance
Panamericano Slams Brazil Mid-Cap Banks
Bonds and shares of Brazil’s Banco Panamericano fell in the day following the announcement of a BRL2.5bn injection from its controlling shareholder to cover losses coming from accounting irregularities and of the replacement of management. The wider implications for the Brazilian mid-sized banking sector, though, still remained to be seen. Panamericano shares dropped 30% to BRL4.77 Wednesday, while its peers and the Bovespa index saw only small losses, with the bourse closing down 0.6% for the day. The bank’s 2020 bonds traded at 90-92 Wednesday afternoon, down from levels of around 107 the day before. “There will probably be a halt to new issuance from the [Brazilian mid-size bank] sector for a few weeks,” says a New York-based credit analyst. He notes the central bank will likely become more restrictive, possibly leading to more strict capital requirements, which could end up being good for the sector. Government-controlled Caixa Economica Federal will maintain its strategic partnership and current stake in local lender Panamericano, it says, adding that the actions taken by main shareholder Grupo Silvio Santos (GSS) would be sufficient to protect other stakeholders. GSS’ quick support, the fact that Caixa is a 37% shareholder, and Panamericano’s small size relative to the system should limit contamination risks, says Barclays. However, “mid-sized banks may potentially suffer from a ‘flight-to-quality’ movement, and experience some short-term pressure on its deposit base, which may potentially limit its ability to continue with its aggressive loan origination effort, or lead to an increase in its cost of funding, both negative for margins,” it says. Moody’s places the bonds, rated Ba2 (senior) and Ba3 (subordinated), on review for possible downgrade.
Brazilian Bank Gets Emergency Injection
The Silvio Santos Group, controlling shareholder of Brazil’s Banco Panamericano, has injected BRL2.5bn into the mid-sized bank, Panamericano says. The funds are aimed to increase the liquidity of the bank and to preserve its current capitalization level after “inconsistencies were established that do not allow the financial statements to reflect the entity’s true state of assets,” the bank says. With the extra cash, the bank says adjustments it is making to financial statements will not lead to a net reduction in assets. Panamericano shares closed down 6.80% Tuesday at BRL6.77.
Peru to Get IDB Loan
The IDB has approved a $110m loan to Peru to reduce poverty by strengthening its principal social protection and labor programs. The loan comes from IDB’s ordinary capital and has an amortization period of 20 years with a 5-year grace period and an interest rate based on Libor.
China’s CCB Pushes RMB Trade
China Construction Bank (CCB) sees scope to significantly increase volume in its settlement business supporting RMB-denominated trade between LatAm and China. “We think it could be a very big opportunity for our bank,” says John Weinshank, head of trade finance and corporate banking at CCB’s New York office. Since the end of April, CCB has done over $300m in deals for international trading companies shipping LatAm commodities to China. Much of it is Argentine soya beans, but the deals also include softs and metals from Brazil and Chile. “By the end of the year it will be more like $500m [in deal volume],” Weinshank tells LatinFinance. Putting contracts in RMB can give suppliers to China an edge over competitors, while also decreasing their reliance on the dollar, says the banker. Payment terms are given up to 360 days and CCB settles for the LatAm exporter in dollars. “Their functional currency is not the dollar, and the dollar’s appreciating while the RMB’s appreciating,” says Weinshank. “If they’re on the selling side, it would make more sense for them to have a more valuable currency that they will translate back to their local currency,” he adds. The product is particularly suited to clients with global flows. They can have proceeds remitted in dollars, or keep an RMB deposit and benefit from any appreciation in the Chinese currency. RMB deposits would also generate a higher rate than USD. “If Codelco or Vale came to us and said we have RMB exposure, can we settle it with you, we’d be delighted,” says Weinshank. The CCB business is run from New York, but the bank is considering establishing offices in region. A Brazil branch looks most imminent, following several trips to the country by senior CCB bankers. The New York branch is not yet authorized to lend to LatAm corporates. CCB is one of the biggest banks in the world.
Schahin Readies ABS
Banco Schahin is preparing a payroll discount loan ABS using the FIDC structure, according to regulatory filings. The Brazilian bank plans to raise BRL300m through a 20-year transaction. It aims to close by the end of December. Schahin does not indicate the price it will seek. Santander is managing the sale, which is yet to be rated.
DomRep Gets $100m Loan
The IDB has approved a $100m loan to the Dominican Republic to help improve the nutrition, health and educational attainment of children and young people from low-income households. The loan is for 25 years, with a 4-year grace period and a variable interest rate based on Libor. The Dominican Republic has also recently received a $120m loan from the IDB to help enhance competitiveness, and a $249m disbursement from the IMF after a review of its stand-by arrangement.
Braskem Files ABS
Braskem has filed to raise BRL588m through an ABS using the FIDC structure. The Brazilian petrochemicals maker’s latest securitization of accounts receivable, known as Chemical VI, will have a 2 year maturity, according to the prospectus. A BRL544.8m senior tranche, rated Aaa on a national scale, will pay a maximum of the DI rate plus 1.3%, while a BRL43.2m subordinated piece, rated Ba1, will pay a maximum of DI plus 5.7%. It does not give an indication of when the FIDC is expected to close. Banco do Brasil, Bradesco and Banco Votorantim are managing the transaction.
Geo Postpones Bond
Maquinaria Especializada, a trust created by Mexican homebuilder Geo for the purpose of leasing construction equipment to the parent, is postponing a bond transaction, according to investors. The issuer is hoping to resume the process in about 2 weeks. It is planning a $160m 2020 bond, according to a Fitch report assigning a BB minus rating, and had been expecting to meet investors the past 2 weeks. Santander is sole lead on the deal. Geo sold $64.6m in construction equipment to Maquinaria Especializada, and has a 10-year agreement with the trust to lease it back, according to Fitch. Geo had previously planned to monetize the construction assets, which were then part of the Geo Maquinaria unit, through transactions in the Mexican domestic market. It made preliminary filings on a certificado de capital de desarrollo and then a domestic ABS, before attempting the dollar market.
Guatemala Gets IDB Loan
The IDB has approved loans worth $250m for Guatemala to enhance the government’s capacity to mitigate climate change. The financing consists of a $213.20m, 20 year loan with a variable interest rate based on Libor, a $29.40m, 30-year loan with a fixed interest rate, and a 40-year $7.40m concessional loan with a 0.25% annual interest rate.