Thursday, 2 April 2009

South Korea's Kexim, IDB Sign Accord to Fund $2 Billion in Projects

The Export-Import Bank of South Korea and the InterAmerican Development Bank will sign an accord to co-finance public and private sector projects worth as much as $2 billion in the next three years in Latin America and the Caribbean. Kexim, as the Korean official export credit agency is known, and the IDB ''will work together to share information and identify and finance projects in infrastructure, information technology, trade finance and other areas,´´ according to a statement.

The Kexim sold bonds in international markets recently. Check our archive for the posting.

Latin Governments are Resorting to Protectionism to Cushion Their Economies From Effects of Global Crisis, According to Analysis Piece by Reuters

Read this interesting analysis piece by Reuters reporter Helen Popper (click on this link to read the story.) Recent evidence found by ING Bank NV economists says Brazil, a country with a very closed economy and lots of restrictions on imports, is to benefit from shutting its borders to imports or awarding cheap credit to local companies during the current crisis. Brazil has been lending massively to companies through the BNDES, the state development bank, for expansion projects, the continuation of ongoing plans and debt refinancing efforts. Some see that as protectionist, since it may break some WTO rules -- we will soon see.

Among the few countries that aren't considering restrictions are those that used the boom of the previous years to build their cash position, reduce public debt and pursue long-term free trade accords: Colombia, Chile and Peru. Of those three, the latter two are better suited to weather the current global downturn. Colombia is struggling, partly because it has structural fiscal and external sector shortcomings.

Going back to the main purpose of the Reuters piece, Popper shows examples of recent measures by Ecuador, Paraguay and Argentina raising barriers on imported goods and tells us of the increased willingness from other governments in the region to retaliate against their partners. This should have implications for companies that, like Brazil's Embraer or steelmaker Gerdau, have some of their natural, more profitable markets in neighbouring Latin nations.

Worth reading it.

Odebrecht Raises $200 Million in Sale of Five-Year Debt, Sources Say

Issuer: Odebrecht Finance Ltd.
Rating: BB (stable) / BB+ (stable)
Tenor: Five-Year (April 2014)
Size: $200 Million
Yield: 10.00 Percent
Bookrunners: Banco Santander SA / Banco Itau Holding Financeira SA
Co-Manager: Banco Espirito Santo SGPS

Accounting Rules Eased in the U.S. ... Finally

The U.S. Financial Accounting Standards Board decided to ease mark-to-market rules that banks say fail to work when markets lack of buyers. Well, as University of Chicago professor Eugene Fama used to spot, in markets characterised by ''fat tails´´ there are no buyers, normally speaking. Well, the FASB identified this, a bit late -- that is the problem of regulatory and oversight agencies in general. They are always late.

The changes approved today to mark-to-market rules will allow companies to value assets in such a way that the writedowns stemming from market declines on certain investments, including asset- and mortgage-backed securities, reflect those declines in a less violent fashion. We should expect the net income results of financial companies being boosted following the changes.

CAF Sells Debt in Colombia -- Showing Resilience of Local Corporate Debt Market During Crisis

Corporación Andina de Fomento, the multilateral institution created by the Andean Region nations to promote investment and lending in greater scale, sold 240 billion pesos (or about $95 million) in fixed-rate bonds on Colombia’s domestic debt markets. The Caracas-based multilateral sold 112 billion pesos in 2014 bonds at 9.60 percent, and 128 billion pesos in bonds due in 2019 at a yield of 10.79 percent. This is CAF’s third peso-denominated bond offering in Colombia -- it had sold 240 billion pesos of floating-rate debt in December. Market talk had put a CAF offering at the end of the second quarter; in a recent talk we had with one bank executive, he said the chances of issuing in Colombia were gaining momentum because of the local markets' rising demand for corporate and quasi-government debt paper amid tanking bond yields. InterconexiónEléctrica SA, the largest utility in Colombia, is expected to place almost 200 billion pesos in six- and nine-year bonds as early as this week. The Colombian debt market is, thus, the most active so far in Latin America; relative to Brazil or Mexico, offerings have been ten times bigger, the market response has been active and movements in yields have reflected the different stages of the current liquidity crisis.

The local securities unit of BBVA, the Spanish lender, managed the transaction. Demand for the CAF bond topped 300 billion pesos, according to buyers of the issue.

Pemex Issues 10 Billion Pesos of Domestic Three-, Seven-Year Bonds; First Step to See Local Bond Spreads Narrowing, People Say

Petróleos Mexicanos SA, the giant oil company controlled by the Mexican government, sold debt in the domestic markets amid hefty demand for long term instruments. We had extensively talked about the health of the Mexican debt market -- which for months has only allowed for corporate paper issuances at the expense of long-term corporate bonds offerings. It seems that finally, issuances from the highest-rated companies are kicking off. Pemex's transaction was a litmus test for the depth of this market -- clearly it passed it well, according to some analysts.

Terms of the Pemex sale were: three-year floating-rate notes (FRN) linked to the benchmark interbank interest rate TIEE; the issue was priced to yield TIEE plus a spread of 100 basis points. The total issued of this tranche was 6 billion pesos. Pemex also placed 4 billion pesos of seven-year, fixed-rate bonds at a yield of 9.15 percent. The yield has an equivalent in Mexican Treasury notes rates -- the Mbonos of similar maturity plus 1.6 percentage points.) Demand for the offering topped a sizzling 24 billion pesos, and most of the bids came in from local pension funds. These funds ended up being the major buyers of the paper, according to a banker involved in the sale.