Latin Finance - March/April 2009 - 60

Colombia infrastructure since early September, they lack the depth to bankroll large infrastructure investment. The local bond market, the most active in the region so far this year, is welcoming issuers whose main aim is to restructure debt, not undertake new projects, according to Laura Ramírez at local brokerage Correval. Furthermore, growing pressure on multilaterals for loans from other countries elsewhere in the region will diminish access this year, Grossich says. The IFC is considering funding only $100 million worth of projects out of a $200 million pipeline for this year, compared with about $105 million in 2008. In addition, large losses posted by pension funds during last year’s market rout may limit their ability to buy infrastructure debt or stakes in private equity funds for the sector, according to Santiago Montenegro, president of the Colombian pension fund association, Asofondos. Higher Borrowing Costs The government’s infrastructure plan for this year, which will trigger more demand for credit, coupled with the crunch, should keep domestic borrowing costs high by raising competition, Dib says. “The issue isn’t necessarily the quality of the projects, but the amount of money necessary to start a project,” Dib says, referring to Ruta del Sol, on which the company is considering a bid. Some companies however were quick to place debt amid a surge in domestic yields. In December, Odinsa raised 80 billion pesos from the sale of fixed and inflation-linked bonds at yields between 13.5% and 14.5% respectively, for a 10-year tenor. In 2002, yields for its sale of 40 billion pesos in five, six and sevenyear debt were around 14.0%. For Nexus, the rise in borrowing costs was steeper. The fund lined up a total $300 million in syndicated loans for the A Place to Issue $105 million-equivalent local bond in February from a Colombian dairy might not be considered especially encouraging in normal times, but Alpina’s issue of 10, 15 and 20-year notes was a notable confidence-booster for the domestic market. The AA+ transaction was the first long-term bond by an issuer that was not a financial institution or utility in more than a year, according to Dealogic, and was done by an issuer rated less than AAA. “Colombia has managed to pass through the financial crisis in some ways as an oasis in the world,” says Carlos Mejía, Alpina’s CFO. He adds that the country’s banks remain strong, with little exposure to toxic assets, and that pension funds are liquid. The development of Colombia’s private pension funds in the last few years has strengthened the capital markets, Mejía explains. Also, governments are nowadays not crowding the markets with their paper as much as in the past. Alpina’s sale, the fifth large domestic issue in year to midFebruary, included 122 billion pesos ($47 million) in 2019 bonds paying 6.70% over the IPC inflation index, 87 billion pesos in 2021 bonds paying a fixed 11.49%, and 56 billion pesos in 2024 bonds at IPC plus 7.40%. Proceeds will refinance Alpina’s debt and go towards investment needed to expand operations. Mejía says spreads on bonds were in February lower than in 2008, and comparable to 2007. Alpina’s issue came during the same week as a 265 billion peso five, 10- and 15-year issue from generator Emgesa, a Colombian unit of Spain’s Endesa, and a 575.2 billion peso sale of 2011 and 2012 bonds from state-backed export bank Bancoldex. Issuance to midFebruary topped 1.6 trillion pesos, according to local broker Correval, on the back of some 3.6 trillion pesos in total demand. Issuance in 2008 totaled $2.2 billion, or about 5.5 trillion pesos, according to Dealogic. Mexico and Brazil, meanwhile, had seen just one long-term local issue each as of mid-February. Chile had not seen any new sales since a handful in January. A Bearing Up “In Colombia, we haven’t had the severe downgrades seen in other countries, so there is not that anxiety about issuers and their access to the market,” says Daniel Niño, director of economic research at Bancolombia. Companies have a renewed interest in refinancing debt, he says, noting that most of the funds raised in the recent issues are going to this purpose. In addition, Colombian corporations do not have the credit and derivative problems found at several companies in Brazil and Mexico. The macroeconomic picture is also somewhat defying trend, Niño says. Colombia’s central bank expects inflation – which hit 7.67% in December – to fall under 5.00% in 2009. It cut rates 50 basis points to 9.0% February 1, saying further reductions are likely. Given the expectations of more dovish policy, issuers can place deals more easily at spreads over the DTF local benchmark rate and IPC inflation index. The DTF was at 8.94% as of February 23, and the IPC at 100.59 in January, up from 100.00 in December. Issuers have been able to get tenors this year of 1-15 years, with issues of more than five years tending to come at spreads to the IPC index, rather than the DTF. Fixed-rate is also possible, with Alpina getting 12 years at 11.49% and Banco Davivienda pricing a 10-year tranche at 10.40%. Longer tenors, of course, fit the investment needs of the country’s pension funds. “Our clients have a lot of liquidity and there is appetite for the securities,” says Laura Ramirez, fixed-income analyst at Correval. She adds that lifting restrictions on OTC trading in June has boosted liquidity. Ramirez notes, however, that sales are still dominated by AAA issuers and financial institutions. Alpina broke this trend, and AA+ candy maker Colombina planned to join, with a 150 billion peso sale. All of the other issuers this year have been AAA rated utilities or financial institutions. As of mid-February, Colombina, Bancolombia, mortgage securitizer Titulizadora Colombiana, and the local unit of Chilean retailer Fallabella were the next in line, according to Correval. LF – Ben Miller 60 LATINFINANCE March/April 2009

Latin Finance - March/April 2009

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