Category: M&A

Colombian state-owned power company EEB has received a $100m loan from CAF to complete the financing of its acquisition of the Ecogas network. Terms of the loan were not disclosed. EEB won a 2006 auction to buy Ecogas for $1.46bn and financed the purchase with short-term syndicated loans later replaced with $750m and $610m bond sales, but was still short $100m. In a separate transaction, City of Bogota received $55m in CAF loans for road improvement.

S&P has upgraded Brazil-based petrochemical company Braskem to BB+ (stable) from BB and taken it off CreditWatch. The rating action reflects Braskem’s improved business profile, resulting from both the acquisition of the control of strategic assets in the Triunfo Petrochemical Complex and a recently announced pact with Petrobras. S&P also notes Braskem’s leading market position in Brazil, pointing toward margin improvement and reduction in credit measures volatility in the future. Constraints include exposure to volatile input costs (mainly naphtha), as well as to working capital swings; reliance on the home market for EBITDA and increasing competition from large local players.

Colombian holding company Colinversiones has bought the Central Termoelectrica Las Flores natural gas-fired power plant for $320m from a group of Colombian investors. It is financing the acquisition with a $300m bank loan. Colinversiones plans to invest $150m in the 447MW plant in Barranquilla to boost its capacity to 610MW.

An Argentine private equity group led by the Eskenazi family is offering what some see as attractive pricing on a $2bn 3.5-year loan to support the acquisition of 25% of YPF, the Argentine subsidiary of Spain’s Repsol YPF. At a well attended bank meeting last week in Madrid, the group told bank participants they could expect to receive 200bp over Argentina’s 3-year CDS, according to a banker who attended. On Monday, the basis was quoted at 380bp-395bp over Libor. An up-front fee of 125bp is also included. Repsol assured prospective participants it would remain closely involved with YPF, and that its engineers and oil and gas experts would remain in control of the technical aspects of the company. The new investors, who today operate among other things a bank, would be involved in the financial and administrative management of the assets. The loan is also heard to be secured by shares and some of the assets themselves, providing needed comfort to banks venturing into Argentina. A $2bn seller’s note is also part of the total $4bn financing package. Credit Suisse is the global coordinator, with BNP Paribas and Morgan Stanley as bookrunners.

An Argentine private equity group led by the Eskenazi family is offering what some see as attractive pricing on a $2bn 3.5-year loan to support the acquisition of 25% of YPF, the Argentine subsidiary of Spain’s Repsol YPF. At a well attended bank meeting last week in Madrid, the group told bank participants they could expect to receive 200bp over Argentina’s 3-year CDS, according to a banker who attended. On Monday, the basis was quoted at 380bp-395bp over Libor. An up-front fee of 125bp is also included. Repsol assured prospective participants it would remain closely involved with YPF, and that its engineers and oil and gas experts would remain in control of the technical aspects of the company. The new investors, who today operate among other things a bank, would be involved in the financial and administrative management of the assets. The loan is also heard to be secured by shares and some of the assets themselves, providing needed comfort to banks venturing into Argentina. A $2bn seller’s note is also part of the total $4bn financing package. Credit Suisse is the global coordinator, with BNP Paribas and Morgan Stanley as bookrunners.

UBS has upgraded CVRD stock to buy from neutral after the equity market correction. “The stock is 17% below its recent high price of $37.75/share (RIO), and we believe M&A activity potential has improved our iron ore price long-term view, which is positive for CVRD,” says the shop. “Also, while some of the concerns we had about CVRD in early October remain, we believe the recent price correction has discounted a higher risk outlook in the short-term,” it adds. UBS also raised its earnings estimates for 2009 by 13% on iron ore. However, it warns that short-term dynamics may be negative due to potentially lower than expected 2008 iron ore price increases. It prefers CVRD to Bradespar, which it rates neutral. “Bradespar remains a way to gain CVRD exposure, although we do not see relative outperformance between CVRD ONs and Bradespar,” says UBS. “We reinforce our view that Bradespar is unlikely to see CVRD-related M&A activity in the next 12 months, and hence should not trade at a premium,” it adds.

America Movil, the regional telecoms powerhouse, is still looking for an acquisition target outside LatAm. “There is really nothing we are contemplating at present,” says America Movil CFO Carlos García Moreno. “There doesn’t seem to be anything particularly compelling out there,” the executive tells LatinFinance. America Movil is generating a cash mountain from its dominance of the booming LatAm mobile phone market and overseas expansion is the likely next step. The Mexico-based company aims to acquire half of the 100 million potential mobile phone customers up for grabs in the region in the next three years and says margins are steadily rising. America Movil claims 45% market share in LatAm, with almost 140 million wireless subscribers. In 3-4 years, García predicts that four in five Latin Americans will have a mobile phone, up from one in two as of August. The region as a whole is 500m potential customers and will go to 80% penetration from 60% in the next three years, he forecasts. M&A specialists on Wall Street say they are making regular pitches to the telecom. Expansion overseas would put America Movil on the path to global power already blazed by fellow Mexican Cemex, Brazil’s CVRD and Argentina’s Techint.

Fitch has placed Gerdau’s ratings on watch negative following the announcement of its acquisition of MACSTEEL, on concerns that the Brazilian steelmaker would fund the transaction with cash and debt and no equity. “Absent significantly higher steel prices in the near term, this acquisition would increase the company’s leverage and further weaken its ability to reduce leverage from the levels reached recently after acquiring Chaparral Steel Company,” Fitch says in a release. The agency has a foreign and local issuer rating of BBB minus for Gerdau and the steelmaker’s 2017 and perpetual bonds, of which there is $1.6bn outstanding. Separately, S&P affirmed its BBB minus mark, with a negative outlook.