BES Investimento proved enduring love for Brazilian bank credit with a $500m 2015 priced at 98.930 with a 5.625% coupon to yield 5.875%, or T+346.3bp, well through initial guidance. Size was said by bankers on the deal to have been lifted from an initial $300m after investors placed $2.5bn in orders. However, a source familiar with the issuer says it had always intended to raise $500m. Official guidance was 6.000%-6.125%, revised to 5.625%-6.000% and the deal was heard up 2pts in the aftermarket. By contrast, Brazil’s Banco Bradesco earlier in the week raised $750m in 5-year notes at 99.996 to yield 4.101%, or UST plus 175bp. This was an upsize from $500m and at the tight end of a 175.0bp-187.5bp over UST guidance on the Baa2/BBB trade. For BESI, Asian investors ordered more than $500m, European around $850m and the US buyside demanded $1.25bn, says a person close to the issue. Institutional, private banking and retail were among the buyers. The deal for the Portuguese bank’s Brazil unit was pulled in early February amid fears of default in Greece, Portugal and Spain that hammered LatAm fixed income. The Baa2/BBB minus was through Deutsche Bank, Espirito Santo and Standard Bank. Co-managers are BB Securities and BBI. Use of proceeds are for general corporate purposes and debt refinancing. The issuer typically funds locally at very short term.
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BAML Poaches Senior Corporate Analyst
Veteran corporate debt analyst Anne Milne is on gardening leave for 3 months after quitting Deutsche Bank for Bank of America Merrill Lynch (BAML), where she will become global head of EM corporate research. Milne was an MD and head of Deutsche’s LatAm corporate bond research group since 2002. Prior to that, she was head of LatAm corporate bond research at JPMorgan. In the relatively small pool of respected LatAm corporate debt analysts with a track record, Milne is a major fish. Her defection is a blow to Deutsche, which is ramping up regional DCM coverage after making some senior hires from Merrill last year. “This is a big name to hire,” says a banker at a competing shop. He adds that Milne’s move makes sense, since she likes to publish and would want to be at a leading market participant. BAML has had a strong start to 2010, rising to second in the LatAm DCM league table. It has booked $1.8bn in proceeds in the year to March 18, taking 11% of the market, Dealogic data shows. This compares to $505m (4.4%) in the corresponding period of 2009, when it ranked eighth. Deutsche remains in ninth position – same as in 2009 – with 5% share. For corporates, BAML is fifth in the region, with 7.92% market share, while Deutsche is seventh with 6.30%, according to Dealogic. BAML also surpassed expectations last year, boosted by a strong high yield corporate run in the second half. It bagged $29.8m in revenue (7.9% share) from DCM, putting it third in the overall 2009 LatAm debt ranking. It failed to make the top 10 in 2008. Deutsche declines to comment on a replacement for Milne.
Technicals Propel LatAm Equity, Says Aberdeen
Though LatAm indices may be down year-on-year and there are some bearish fundamental influences, inflows are supportive for equity, according to major EM investor Aberdeen. “Given the headwinds of slow economic growth and rising interest rates, I wouldn’t be surprised if [the Mexican Bolsa and Bovespa] were down year-on-year,” Devan Kaloo, head of global EM equities at UK-based Aberdeen Asset Management, tells LatinFinance. “But equally probable is that given the ridiculously loose monetary policy we’re seeing in the world today – and the fact that in a relative view emerging markets look better than just about anything else – we’ll probably see more money flood in and the asset classes continue to do quite well,” he adds. Aberdeen has $5.5bn under management in LatAm equity and is overweight Mexico and neutral Brazil. Kaloo views inflation as the biggest threat to the region, given the effect it can have on politics. In its bottom-up company-focused approach, Aberdeen prefers names linked to consumer growth, such as Lojas Renner and Ultrapar in Brazil, and America Movil, Femsa and Banorte in Mexico. He does not like assets dependent on the glut of government spending expected in countries like Brazil. “The IPO bubble of 2007 was extremely healthy for Brazil. This time around with the new deals, hopefully people will be a bit more sensible,” says Kaloo. Aberdeen tends to avoid IPOs, and generally looks to buy companies with established track records. An important distinction in Brazil, he says, is between companies set up by experienced managers delivering performance, and those that are little more than a business plan. Overall, Kaloo says Brazil is one of the strongest long-term stories in EM. He does not expect this year’s elections to cause much volatility. “If the companies on the ground aren’t worried, then we see little reason to be worried,” says the investor.
AmBev Eyes A Grade
Moody’s has placed AmBev’s Baa1 ratings on review for possible upgrade, introducing the possibility of a low single A rating. The review is prompted by AmBev’s resilient operating performance and prudent financial policies during the global economic crisis, combined with an overall improvement in several sovereigns where AmBev operates. Credit metrics also improved throughout 2009, the agency says. The review also reflects a recent change in outlook to positive from stable of AmBev’s 74% owner, Anheuser-Busch InBev’s (ABI) Baa2 rating, reflecting ABI’s solid execution of the company’s de-leveraging plan so far, which included the numerous asset divestitures, and improved liquidity profile. Throughout FY 2009 in light of the difficult global liquidity environment, AmBev essentially paid off all of its near-term debt maturities as they came due and reduced total adjusted debt by 31.3% to 7.6bn at the end of 2009 from BRL11bn at end-2008. Meanwhile, its cash balance increased by 27.5% to BRL4.1bn in 2009. AmBev is the largest brewer in LatAm.
MPX Eyes $1.9bn Colombia Investment
Brazil’s MPX Energia plans to invest $1.9bn over the next 10 years to develop a port, 3 open-pit coal mines and a 150 km railway in Colombia, CFO Rudoplh Ihns tells LatinFinance. He explains that initially, the company will seek to invest $366m to develop the port and mines. The remainder will be used to develop the railway and logistics. “We are waiting for an environmental license, which we expect to obtain in September and will then begin construction,” he says. The port should be operational in 2013, according to company information. To finance the initial project, MPX will use $17m in equity and seek financing from Colombian and foreign banks, CAF and ECAs. Ihns says the company has not yet selected banks. The company will use some of the cash coming from exporting coal to Brazil from Colombia in addition to financing to build the railway, Ihns adds. Coal production is expected to begin in 2012, hitting 15m tons annually in 2021. MPX is part of Brazilian billionaire Eike Batista’s Grupo EBX.
Hochschild Sues Minera Andes Over Loan
Hochschild Mining has filed suit in the New York State Supreme Court, asking that Minera Andes be required to execute formal loan agreement documents for a $65m project loan. Hochschild provided the facility to the San Jose gold and silver project in Argentina, a joint-venture between Hochschild (51%) and Minera Andes (49%). The complaint alleges that Minera Andes Inc (MAI) and Minera Andes SA (MASA) unduly delayed execution of formal loan documents and repayment of the loan by the JV, known as Minera Santa Cruz. “Hochschild has made repeated attempts to finalize the formal loan agreement documents, but the suit alleges that MAI and MASA have made demands never contemplated by the original letter agreements,” says Hochschild. Under the terms of agreements signed in October 2006, Hochschild alone provided the full amount of the project financing, totaling $65m in installments between October 2006 and July 2007. The suit asks that MAI and MASA be enjoined from further interference in the repayment of the project finance loan, asks the court to order payment to Hochschild of benefits derived by MAI and MASA as a result of the loan, and requests an order declaring that other shareholder loans are subordinate to the project facility. “Despite claims by Hochschild, Minera Andes has and continues to be willing to execute definitive loan documentation with Hochschild that reflects the commercial agreement of the parties as set out in a letter agreement dated October 10, 2006,” says Minera Andes in a statement. “We look forward to reaching a resolution in respect of these project finance loan documents,” adds Rob McEwen, chairman, president and CEO of Minera Andes. Minera Andes says it is reviewing in detail the claim by Hochschild with its legal advisors and will respond accordingly.
EchoStar Abandons Satmex Bid
EchoStar and joint-venture partner Mexican communications firm MVS Comunicaciones have abandoned an offer for Mexican satellite operator Satmex after holders of more than 50% of its second priority senior secured notes refused to back the deal worth up to $374m. The would-be buyers offered to inject $267m in cash and use another $107m of Satmex’s own cash to pay creditors and shareholders in exchange of 100% of the equity of a debt-free Satmex. However, holders of the debt and equity could not reach an agreement on how to divide the cash. First-lien creditors would not accept a haircut, shareholders wanted to get paid something and second-lien creditors balked at being squeezed on both sides, says BCP director of corporate research James Harper. “There is a sense that the holders of the first lien notes are not willing to give up anything,” he explains. He adds that the only alternatives left to Satmex are to continue operating while trying to finance construction and launch of at least 1 new satellite or find another buyer. He does not expect EchoStar and MVS to return with a higher bid. Harper, who declines to comment on BCP’s exposure to Satmex, says that to pay its debt, Satmex would need to continue operating. But of its 3 satellites, 1 is not functioning, another should be operational for about 11 more years and a third only has capacity to last for another 2.5 years, he explains. Satmex is still generating cash in these conditions, and in the last 12 months made $88m. It also has $110m-$120m cash but needs to get a new satellite to continue generating cash after 2.5 years. A new satellite, he says, will cost over $300m. Harper adds that there is also a risk that clients will abandon Satmex and seek another provider, as it knows that one of the satellites will not be working after 2.5 years. Satmex says it continues to study its strategic alternatives and restructuring options. Jefferies advised the note holders and Deutsche and Peter J. Solomon advised EchoSt
Carvajal Places Local Bonds
Colombia’s Organizacion Carvajal, a company with holdings in the publishing, outsourcing and packaging sectors, has issued COP400bn ($209m) in AA+ rated local bonds. A 7-year tranche paying 5.33% over IPC was for COP240.8bn while a 10-year tranche paying 5.67% over IPC raised COP159.2bn, according to a banker on the deal. He adds that total demand soared to COP641.1bn. Citivalores managed the sale.
Alsea Sells Domestic Bonds
Mexican restaurant operator Alsea has sold MXP400m in 3-year local bonds paying 175bp over TIIE, according to a banker on the deal. He adds that demand was 1.4x the issued amount. Proceeds of the AA issue will go to refinance debt. HSBC managed the sale.
Financiera Independencia Tours Dollar Issue
Mexican microcredit institution Financiera Independencia says it plans to issue up to $300m in USD denominated 2015 senior guaranteed notes. The 144a notes, to be issued in the US, will pay an annual interest rate of up to 11%, the company says in a statement to the Mexican stock exchange. A “non-deal” roadshow is happening now, with apparently no indication on size or price. A person familiar with the issuer says it will likely issue much less than $300m and price well south of 11%. Proceeds will be used to refinance debt and allow the Sofom to make strategic acquisitions. Bank of America Merrill Lynch and Morgan Stanley are leading the sale. Earlier this year, Financiera Independencia acquired Brazilian peer Finsol for MXP530m.