Mexico plans to renew its $48bn flexible credit line with the IMF, the multilateral says. Despite Mexico employing sound economic policies, which have led to signs of recovery, “uncertainties remain in the global environment,” says John Lipsky, IMF deputy MD. In response to the credit crisis, the IMF launched the FCL in March 2009 to replace its short-term liquidity facility, calling it an insurance policy for strong performers that can be fully disbursed as needed, rather than conditional on compliance with policy targets. Mexico’s FCL, the first under the program, features a repayment period of 3.25-5.00 years and the line can be renewed. It pays fees of 15bp for drawing up to 200% of quota, 30bp for 200%-1,000%, and 60bp beyond that.
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JPM Drops Mexico Exposure
JPMorgan is cutting exposure to Mexico credit by selling $1m UMS old 2019s and shifting to market weight from overweight in the model EMBIG portfolio. “While the cyclical rebound and higher oil prices remain positives, we prefer to reduce exposure to low beta credits,” says the bank. On the UMS curve, JPM advises reduced duration exposure by switching out of 2019s and 2022s into 2017s and 2015s. Mexico has modestly outperformed the index (3.1% ytd versus 2.8%), despite digesting $3bn of issuance so far from Pemex and the sovereign, says JPM. The bank favors high yielding countries like Argentina and Venezuela, as well as frontier credits like Belize, the Dominican Republic and Jamaica. JPM also notes that while LatAm high grade credit is not necessarily rich versus the US, there is little scope for outperformance. On the other hand, it sees scope for significant underperformance should credit more generally, and sovereign credit in particular, come under renewed pressure.
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RBC Predicts Strong Brazil Growth
Brazil’s GDP growth will jump to 6.0% this year and 5.0% in 2011 and is unlikely to fall below 4.5% over the next 5 years, says RBC, which predicts associated BRL outperformance. The Canadian bank notes that Brazil’s government is engineering a pro-growth policy based on a wave of initiatives to boost the economy. The main focus includes credit growth, expansion of investment initiatives and raising the minimum wage. Other important structural factors: the rise of the middle class, long-term decline in real interest rates, upgrade to investment grade, growing Asian commodity demand, and stepped-up FDI inflows, adds RBC.
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Consortium Claims Pole Position for New Farac
A consortium of Portugal’s Mota-Engil, Brazil’s CCR and Australia’s Macquarie claims to have submitted the best bid for the latest in the family of Mexican toll-road packages known as Farac. The 30-year concession for the Noroeste package of roads and bridges in the states of Nuevo Leon and Taumalipas is expected to require an investment of MXP8.39bn. Now that the government has apparently opened bids, it will examine them and is expected to formally announce a winner mid-April. State infrastructure bank Banobras will provide financing of MXP4.57bn, Mota-Engil says. Officials from the 3 firms did not respond to requests for comment on additional financing options. Mota-Engil, through its Ascendi concession unit, Macquarie and CCR would each hold one-third of the concession. Macquarie is participating through its Macquarie Mexico Infrastructure Fund I, launched last year with investors including pension funds participating through the CCD market. The package includes both operational assets and new construction, which Mota-Engil estimates to be completed in 2013. As of late Wednesday, Mexico’s government had not confirmed Mota-Engil’s claim to have submitted the best bid.
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Chile Gets $300m CAF Financing
CAF has approved a $300m credit line for Chile to help with earthquake relief. The amount is in addition to the $250m donated by CAF immediately following the quake. The facility may be tapped in the next 4 years at maturities of up to 18 years, a CAF spokeswoman says. No further details were available.
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Telemar Rings Reloaded Local Issue
Telemar has rebalanced the tranches on a BRL2bn domestic bond sale, which was postponed in January, slightly reducing supply at the long end. The new deal will include a BRL1.8bn 4-year, previously BRL1.5bn at 5 years, and a BRL200m 10-year, formerly BRL500m, it says. The new amounts have been approved by shareholders. The company will still have to determine the rates it plans to pay and await regulatory approval before issuing the notes, likely by mid-year, an investor relations official says. In the original plan, the 5-year tranche was set to pay DI plus 1.20% and the 10-year priced at inflation plus 8%. Proceeds from the sale will repay debt. Telemar, also known as Oi, is rated AAA on a national scale. BTG Pactual and Santander are managing the transaction, which was pulled at the start of the year amid reported investor pushback.
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EPM Telecom Unit Readies Domestic Bond
EPM Telecomunicaciones, the telecom unit of Colombia’s Empresas Publicas de Medellin, is preparing to sell Friday COP200bn in bonds on the domestic market, according to a broker managing the sale. It has the option to sell up to COP300bn. The issuer, also known by its Une brand, will split the sale into 5-year and 10-year tranches each paying interest at a spread over IPC. Coreval and Bancolombia are managing the sale, rated AAA.
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Isagen Borrows for Hydro Project
Colombian state-controlled power generation company Isagen has signed a COP1.54trn ($812m) 10-year loan to finance the Sogamoso hydroelectric project, it says. The company does not disclose the rate on the loan, which includes a 3-year grace period. The group of lenders is composed of Bancolombia, Banco de Bogota, Davivienda, Banco de Occidente, Banco Popular, Banco Agrario, AV Villas, BCSC, Banco Santander and Helm Bank. The 820MW plant on the Sogamoso River in eastern Colombia is expected to cost COP4.5trn. Isagen will add the loan funds to those raised in a COP450bn September bond sale and a $140m CAF loan agreed in December. The company says it may issue another COP400bn in bonds to support the project, which it says requires COP2.7trn in financing.
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Camargo Unit Hits 72% in Buyback
Camargo Correa has received consent from holders of $180.6m, or 72.3%, of a 7.875% coupon 2016 bonds sold through its CCSA Finance unit. The Brazilian industrial conglomerate is offering holders $1,075 for each $1,000 principal amount of notes, with an additional $20 for those agreeing before the March 9 early deadline. The offer for all of the $250m outstanding bonds expires March 22. Camargo does not plan any fundraising to support the buyback, according to a banker managing the sale. JPMorgan is dealer-manager. The notes were sold in 2006, through Credit Suisse and BNP.
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Metrogas Taps Barcap, Suffers Downgrade
Argentina’s largest natural gas distributor Metrogas has hired Barclays to evaluate debt refinancing alternatives. S&P meanwhile chopped the issuer to CC from CCC minus, saying that the company faces high refinancing risk in 2010 and 2011, when maturities will reach $21m and $42m, respectively. The outlook on the rating is negative. “Metrogas’ financial risk profile has been gradually weakening during the past three years due to increasing operating costs and a high currency mismatch between revenues and debt service, amid inflation, currency devaluation, and freeze of tariffs,” says S&P.