Sovereigns Crowd the Market
Four sovereigns tapped international markets in quick succession at the start of September, with issues totaling $2.65 billion. Argentina took advantage of its record low country risk to open 2007 financing and issued $500 million of its $2 billion dollar-denominated Bonar VII. The issuance didn’t generate the excitement of the previous July Bonar V offering but sold at the same yield of 8.34%. Brazil’s issuance was part of its effort to build out a yield curve for local-currency bonds. The $750 million-worth of real-denominated bonds, which mature in 2022 and are the longest local-currency fixed-rate bonds issued by the sovereign, were sold to yield 12.875%. Citigroup and JPMorgan Chase managed the sale. Colombia’s $1 billion global issue was sold to fund a $700 million buyback of shorter-term external debt. The bonds, due 2037, were placed at a yield of 7.453% – 250 basis points above comparable US treasuries. The sale was managed by Goldman Sachs and Merrill Lynch. Finally, Uruguay got out a global 2018 bond, which it upped from $300 million to $400 million. The index-linked bond pays a real rate of 5%, replacing more expensive debt maturing later this year. Citibank and Deutsche Bank placed the issue.
Mexico’s president is doing some financial housekeeping before handing over the keys to Los Pinos. President Vicente Fox aims to leave Mexico with an external debt-to-GDP ratio of around 6%, half of what it was when he took over in 2000. In August, despite the brouhaha in the Zocalo, the sovereign confidently raised $12.4 billion via the sale of local-currency bonds to prepay $9 billion of its $13.4 billion debt to the World Bank and the Inter-American Development Bank. Then, in September, it swapped $500 million of dollar-denominated bonds for local-currency debt, part of a larger program to swap $3.2 billion of external debt for domestic issues.
Peru continued to tap domestic markets to meet this year’s $660 million in financing needs. In mid-August, it sold $120.7 million worth of bonds issued in two series: one maturing May 2015 to yield 6.9% for $46.5 million and another maturing August 2026 with a rate of 7.55% for $74.4 million.
TGN Closes Swap
Argentine gas distributor Transportadora Gas del Norte (TGN) closed its $664 million debt swap program at the end of August, with uptake of 99.94%. Participating creditors included the International Finance Corporation and institutional investors such as ING. The company offered bonds, stocks and cash payments.
Su Casita Breaks Ground
Mexico’s largest home finance company, Hipotecaria Su Casita, broke new ground when it raised $94 million of mortgage-backed securities (BORHIS) in August guaranteed by private mortgage insurances. It was the first time such instruments have been issued in Mexico. The paper was denominated in inflation-indexed investment units (UDIs) with a 29.5-year maturity. Genworth Financial Mortgage Insurance issued the guarantees and JPMorgan acted as trustee.
Banco Río Stands Out
In Argentina’s booming securitization market, dominated by financial securitizations, was the Banco Río placement in mid-August of $30.2 million of mortgage-backed securities, the largest such securitization since 2002. The Super Letras Hipotecárias were sold to yield around 2.75% above the CER rate.
IIRSA Paves the Way
Peruvian toll-road concessionaire IIRSA Norte sold $213 million of securitized bonds in August under 144A rules in the US. The bonds are backed by certificates of annual payments (CRPAOs) that the government makes to the concessionaire to compensate for progress in construction. It was the first time a Peruvian company raised financing this way, according to law firm Roselló, which advised IIRSA Norte. Morgan Stanley & Co acted as lead manager.
Brazilian aircraft manufacturer Embraer secured a $500 million syndicated loan facility from lenders headed by BNP Paribas. The standby credit comprised a $250 million trade finance credit, available until 2009, and a revolving credit of $250 million to be drawn down before 2011. BNP Paribas was the sole bookrunner.
Chileans Keep ‘Em Coming
Banco de Crédito e Inversiones (BCI) led Chilean banks on September 1 by selling local paper – $34 million worth of 25-year subordinated bonds at an annual interest rate of 4.35%. The deal was managed by BCI Corredores de Bolsa. Following suit was Banco de Chile, which issued $171 million worth of five-year bonds at an annual interest rate of 3.69% and a spread of 63 basis points above benchmark central bank bonds. Finally, state-owned BancoEstado sold $169.6 million in local inflation-linked bonds with an annual interest rate of 3.49% and a spread of 47 basis points over the central bank’s benchmark bonds.
Leading the Charge
Banco PanAmericano led the charge of Brazilian corporates looking to tap international markets before year-end by selling $125 million of 10-year subordinated notes at end-August. The bank hopes to use the money to expand its capital base. The transaction was led by Banco Espírito Santo and Dresdner Bank.
Reopening the Issue
Brazil’s Banco BMG, a market specialist in lending, reopened a Eurobond issue in early August to sell a further $150 million of the paper. The bank sold $200 million of the notes last June. The 2010 bonds carry a coupon rate of 8.750%. The lead manager was Morgan Stanley.
OLA to Millicom
Luxembourg-based Millicom won control in August of Colombia Móvil (OLA), the country’s third-largest mobile phone company, for $478.5 million, the minimum price accepted by owners Empresa de Telecomunicaciones de Bogotá (ETB) and Empresas Públicas de Medellín (EPM). Millicom, the sole bidder in the auction, will control 50% plus one share of OLA.
Herradura Strikes Gold
US spirits manufacturer Brown-Forman, the maker of Jack Daniels, agreed in August to pay $876 million for assets of Mexico’s Grupo Industrial Herradura, through which it hopes to grab a larger share of the booming US tequila market. Lehman Brothers acted as financial advisor to Brown-Forman while Merrill Lynch advised Herradura.
Glencore Refines Bid to Win
Swiss-owned Glencore International won control of Colombia’s Cartagena oil refinery at the end of August, beating out Petrobras of Brazil. Glencore more than doubled its offer for the 51% share to $630.7 million to top a second-round Petrobras bid of $595 million. Colombia’s state-run Ecopetrol had set a minimum price of $625 million. Ecopetrol was advised by ABN AMRO and Sumatoria.
PDVSA Sells Out
Venezuela’s state-owned oil company PDVSA sold its 41.25% stake in the Citgo-Lyondell refinery in Texas to partner Lyondell Chemical in August for $2.1 billion, which matched an offer made by Marathon Oil earlier this year. Morgan Stanley advised.
Antofagasta Keeps the Treasure
Chilean copper miner Antofagasta took control of Australia’s Equatorial Mining in August for $400 million. The 97% stake in Equatorial gives it ownership of the El Tesoro mine in northern Chile. Antofagasta has run the mine since 1999 and owned a 61% stake in it, with the balance owned by Equatorial. Rothschild acted as financial advisor and Minter Ellison as legal advisor.
Following much speculation, Colombia’s second-largest retailer Carulla Vivero – controlled by US investment fund Newbridge Andean Partners – surprised the market and selected local rival Almacenes Éxito, controlled by the Colombian conglomerate GEA, to be its strategic partner. It sold a 19.8% stake to Éxito in August for $110.5 million. Éxito then said it would buy up to 77.5% of the company with the aid of a share offering. Credit Suisse and JPMorgan advised.
Telmex Spreads it Around
Mexico’s largest fixed-line telecom operator, Teléfonos de México (Telmex), was busy shopping in August. It started by snapping up shares in Portugal Telecom equivalent to a 3.4% stake – presumably spotting a bargain ahead of a takeover – and followed by paying $22.5 million for Ertach, a wireless solutions company in Argentina. It also quietly acquired Colombian cable TV company Superview for around $40 million.
Stora Enso Sweeps up in Brazil
Finland’s Stora Enso, the world’s largest paper manufacturer, swept in to capture the Latin American coated magazine paper market in August with its purchase of the Brazilian plants Vinson Industria de Papel Arapoti and Vinson Empreendimentos Agricolas, owned by International Paper Co. of the US. The deal was worth $420 million. Lazard advised Vinson while Citigroup advised Stora Enso.
Asian Tie-Up In Omimex
ONGC Videsh, the overseas investment arm of India’s state-owned Oil and Natural Gas Corp, and China’s second-largest oil company, Sinopec, paid $800 million mid-August for a 50% stake in Omimex de Colombia, owned by Omimex Resources of the US.
Itaú Takes the Rest
Brazil’s Banco Itaú agreed to buy the remaining BankBoston operations in South America owned by Bank of America, in Chile and Uruguay, for $650 million in stock. Merrill Lynch acted as financial advisor to Itaú. In May, the São Paulo-based bank paid $2.2 billion in stock to acquire the BankBoston operations in Brazil.
Keep On Keeping On
São Paulo state-owned power company Companhia Energética de São Paulo (CESP) continued with its capital restructuring plan in August, earning itself a rating upgrade from Moody’s. CESP extended its program to sell $220 million of seven-year unsecured notes at a yield of 9.5%. Banco Finantia and Standard Bank led the operation. The utility also issued a four-year receivables securitization fund (FIDC) worth $306 million. Itaú acted as trustee.