Homebuilder Gafisa has set a date and issue size for its upcoming follow-on equity offer, whose proceeds are earmarked for land acquisitions, M&A, new launches, working capital and investment in existing projects. The company plans to issue 74m shares March 23. Using Monday’s closing price of BRL13.95, the base offering could result in proceeds of BRL1.03bn. The company says it may grant underwriters a 15% greenshoe of 11.1m shares, which could add another BRL154m in proceeds. A 20% hot issue is also an option, says Gafisa. Itau, JPMorgan and Votorantim are joint leads.
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Ferrous Reignites London IPO Talk
Brazilian iron ore miner Ferrous Resources has reignited talks to list itself on the London Stock Exchange, according to executives close to the process. JPMorgan Cazenove, which has run London listings for other LatAm miners including Hochschild and Fresnillo, is advising the company through the process. In 2008, Ferrous pulled its first attempt to list on the UK exchange also through JPMorgan. Ferrous Resources was formed in 2007 with a goal to acquire and develop mainly Brazilian iron ore assets. Its top managers include alumni of Vale, Rio Tinto, CSN.
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Investors Dial 2019 for Axtel
Mexican telecom Axtel has shrugged off a downgrade and taken advantage of the recent LatAm high-yield supply dearth to raise $190m by reopening its 2019. The 9% coupon NC5 bond was tapped at 102.500 to yield 8.609%. The transaction was heard open for less than an hour and driven by reverse inquiry. The bonds had been trading at 103 prior to launch – up from par when initially launched mid-September – and heard trading just below 103 after the tap. The transaction was about 2.5x subscribed, according to bankers on it. Proceeds will prepay a 2012 term loan, as well as cover $32m in nearby indebtedness, fund $30m in 2010 maturities and go to general corporate purposes, Axtel says. The telecom is rated BB/B3/B minus. The telecom raises cash just 2 days after a Moody’s downgrade from Ba2, which was caused by competitive pressure and continued negative free cashflow. Axtel originally sold $300m of the bonds September. It generated demand of over $3bn to fund a liability management exercise. The original managers, Credit Suisse and Bank of America-Merrill Lynch, ran the retap.
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Vale Diversifies Into Euro Debt
Vale is diversifying its funding base with a debut euro-denominated bond next week, fuelling talk of a revival in LatAm issuance to Europe. The deal is a strategic move for the iron ore giant, say bankers leading it, with volume not the main objective. Size and tenor of the new deal should be finalized in meetings with the buyside next week. “The euro market is available, and there is appetite. Whether there is appetite for Vale depends on their marketing,” says a London-based investor managing more than $1bn in debt who is planning to meet the borrower. However, tapping euros might cost Vale 15bp on a swap basis, notes the buysider, though the real value lies in accessing new accounts. Both investors following the deal and bankers say the euro market could accommodate a benchmark-sized transaction, of at least EUR500m in size. A 3-team roadshow begins in London, Germany and Switzerland Monday, visits Paris, London and the Netherlands Tuesday, and finishes Wednesday with a global investor call. BNP, Credit Agricole, HSBC and Santander are managing the Luxembourg-listed sale, which is rated BBB/ Baa2/BBB+. Vale says it will use proceeds for general corporate purposes, including capex, liability management, and possible acquisitions. Barclays sees increasing involvement from investors pricing Vale versus international peers such as Rio Tinto rather than the Brazil sovereign, which should lead to curve tightening. Vale last issued debt in November, with a $1bn sale of 6.87% coupon 2039s yielding 6.99%. The last LatAm issuer in euros was Cemex, with EUR350 in 9.625% of 2018s NC4 in December. In September, Pemex got EUR1bn in 2017s to yield 5.62%, claiming pricing of 5-10bp through the dollar curve in the first non-sovereign LatAm EUR-denominated bond since 2005. “As Latin sovereigns and high-quality corporates sense that the euro space is open, this transaction could pave the way for other issuers,” says the London-based investor. Petrobras is likely among other LatAm i
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Mexico Seeks IMF Line Extension
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.