BNDES has approved financing of BRL1.5bn for mobile-phone operator TIM Participacoes. The package is split into three 8-year facilities. A BRL490m piece pays TJLP, plus 0.9%, plus an additional undisclosed risk spread assigned to the company. A BRL714m chunk pays TJLP plus 1.8%, plus the risk spread. A third BRL306m tranche, for non-equipment related expenses, pays ICPA plus the risk spread. The line will be used by the company to finance part of its 2009-2013 investment plan.
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Banco General Eyes Perp
Panama’s Banco General is planning to sell a perpetual bond, its first, in the local market. “We’re considering for later this year an offering of a perpetual bond in Panama,” Raul Aleman, the bank’s executive vice president and general manager, tells LatinFinance. General, the country’s largest bank by assets following last year’s merger with Continental, has not yet set a size for the offering, but has filed for up to $200m, Aleman says. He adds that the deal could be offered in tranches. “Institutional financing going forward will be scarce and expensive,” he explains, adding that General is also looking at medium-term financing with the IFC. It raised $160m through a syndicated loan in June at Libor plus 75bp and 85bp for tranches of two and three years, respectively.
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Argentina Seen Including GDP Warrants in Swap
Argentina may include GDP warrants and look to exchange Bodens 12s as well as guaranteed loans in its offer to holdout bondholders, according to local press reports. The warrants are not expected to include rights to payments made by the government on the securities before the date of the swap, nor payment in December, according to the leaks. “Both pieces of information would be positive, if confirmed,” says Goldman Sachs. “The addition of GDP warrants to the offer to the holdouts would boost the value of the proposal by about $7 and increase the probability that the exchange will succeed,” it adds. The shop also notes that inclusion of Boden 12s confirms an intention to refinance as much of the debt coming due in the next 3-4 years.
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Tighter Credit Seen Hitting LatAm Equity
While LatAm has been relatively insulated from the credit crisis, given a generally low exposure to US imports, tightening credit is likely to affect a number of companies, according to Citi. The shop runs several screens evaluating corporate balance sheets, debt maturities and free cashflow to arrive at a list of names that, from a technical point of view, are more exposed to worsening credit conditions. Companies like Lojas Americanas, B2W, Unipar, Lupatech and LAN Airlines have net debt to total capital ratios of 86%-56%, and between a third to half of that debt in the bond markets. Companies with the lowest interest coverage ratios in the region include Ecodiesel, Cosan, Vivo, Sadia and Unipar, with ratios of 0.5-1.6. And among those with the largest amount of debt maturing in the next two years given their free cash flow situations are Cosan, ICA, Brascan, PDG and BR Malls, all with FCF/ maturing debt ratios of minus 11.1 to minus 6.2, says Citi.
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LatAm Loan Volume Halves
Syndicated loan volume from LatAm and the Caribbean plummeted 49% in the first three quarters of 2008 versus the corresponding period of last year, according to Dealogic. Borrowers raised some $37.0bn in the period as the bank market tightened up and corporates stepped out. LatAm is the least active EM region in the period for loans, with volume relatively in line with the $30.4bn raised in India and the subcontinent. Southeast Asia bucked the global trend with a 50% surge in activity to $49.0bn. Europe and North America contracted at a similar rate to LatAm, hitting $775bn and $945bn, respectively. Bankers say LatAm corporates are sitting comfortably with their maturities, having taken advantage of rock-bottom spreads to refinance aggressively between 2005-2007 at tenors of 5 and 7 years. Dealogic data shows LatAm corporates face aggregate maturities through the end of the year of just $4.1bn. Deals slated to mature between October and December include a $620m facility for Pemex, $600m from PDVSA, $561m at Grupo Kuo and a $300m CSN transaction.
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Fresh Blood on Floors of LatAm Bolsas
After a modest midweek bounce, LatAm bolsas have resumed the bear trend, with fresh losses in yesterday’s session. Brazil’s Ibovespa flopped 7.34% Thursday to 46,145, off the day’s low at 45,113. It skidded as deep as 43,766 earlier in the week, amid the sharpest decline in more than a decade, and remains under the influence of declining US markets and fears of further global deterioration. The BRL meanwhile slipped back to BRL1.925/USD, heading back towards the BRL1.964/USD Monday trough. Other regional stocks and FX also suffered, including Mexico, whose bolsa fell 4.34% to close at 24,027, off the day’s low, which was marginally above the week’s trough. And the peso slumped back to MXP11.174/USD, while the Chilean and Peruvian currencies also buckled. The Dow Jones meanwhile fell 3.22% and LatAm looks set to mirror the trend in technical trade, overshooting either way, though an end-of-week relief rally looks likely. Analysts are starting to fret over a much bigger negative impact on LatAm once the damage to US hedge funds and the real economy is felt. MSCI LatAm was down 19.6% in September, undermined mainly by Brazil (-23.1%) and Argentina (-24.7%) and worse than most other regional indices. However, some analysts are optimistic. “A combination of low LatAm valuations, and likely resilient corporate earnings will allow LatAm equities to bounce back,” says UBS. “Oversold EM markets at some point will enjoy a substantial trading bounce,” adds Merrill Lynch.
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Cosan Holdco Places Shares Privately
Cosan Limited, the offshore-based entity that has a controlling stake in the Brazilian sugar and energy company, has raised $180m through the private placement of shares. Rio-based Gavea Investimentos bought $130m of the deal, comprised of 16.5m ordinary class A shares at $7.90 apiece. Funds controlled by Rubens Ometto Mello, the main shareholder in Cosan Limited and the ultimate controlling investor of the entire company, acquired the remaining $50m, or 6.3m shares. The transaction is equivalent to a private equity (PE) investment, whose proceeds will go towards fortifying the balance sheet and financing growth. Gavea has said that it plans to target public companies in its PE vehicle through such transactions. Cosan SA shareholders did not participate in the deal. Morgan Stanley advised.
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Brazilian M&A Surprises on Upside
Brazilian targeted M&A volume jumped 103% to $62.9bn year-on-year in the first 9 months of 2008, Dealogic data shows. EM targeted M&A meanwhile fell 5% to $608.5bn in the same period, but rose as a proportion of total volume, accounting for 22% of global M&A from 17% in the corresponding 2007 period. China topped the list, followed by Russia and Brazil. The latter is much more vibrant for bankers than the developed markets. Global announced M&A volume reached $2.81trn through September 24, a 24% drop on comparative 2007 $3.69trn volume, Dealogic data shows. Strategic M&A volume is down 11% globally but deal activity has risen 4%. Global buyout volume is 72% lower, while the number of deals has dropped off 25% year-on-year, the data tracker adds. Credit Suisse has bagged the lion’s share of LatAm M&A volume so far this year.
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Argentina Plans GDP Warrant Buyback
Argentina’s economy ministry will today hold a new debt buyback auction, targeted solely at its USD and ARP-denominated GDP warrants. It will repurchase up to ARP100m ($32m) in the two classes of security, which were included in the previous auctions along with 2012 and 2015 dollar denominated Boden bonds. Argentina suspended those weekly auctions three weeks ago after agreeing to repurchase ARP81m in three auctions. The revived buyback program follows the launch of a new plan to restructure $20bn in defaulted debt held by creditors who rejected the government’s 2005 debt swap offer.
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Perfect Storm Bashes Remittances
Economic downturns in the US and Spain, inflation and a weaker dollar will cause a fall in money transfers from LatAm migrants for the first time this decade, according to the IDB’s MIF unit. Migrants from LatAm and the Caribbean will send some $67.5bn to their homelands in 2008, against $66.5bn in 2007, some 1.7% less year-on-year when adjusted for inflation. Until last year, remittances to the region had grown by double digits every year, says MIF, which says this is the first drop since it started tracking these flows in 2000. The new estimates are based on monthly and quarterly data from nine LatAm central banks in countries that receive about 88.5% of the remittances flowing to the region. Earlier this year the MIF had noted that remittances to Mexico, the leading destination of such transfers in LatAm, were no longer rising, while remittances to Brazil, the second biggest recipient, had dropped in 2007. “More recently, Guatemala and El Salvador have reported declines in remittance flows,” says MIF. Nonetheless, the volume of remittances to the region still outstrips all overseas development aid and FDI.