Finance Markets

May 18, 2005

Bolivia legislates new laws for oil profits

Filed under: Oil, Americas
Bolivia legislates new laws for oil profits

The Bolivian government on Tuesday night enacted a law that will raise taxes on gas and oil and force changes to existing contracts with oil producers.

One of the most alarming provisions of the law to foreign companies operating in the country replaces existing risk-sharing agreements with new arrangements imposed by the government within 180 days of the law’s enactment.

The new law also imposes a non-deductible 32 percent tax at the wellhead in addition to the current 18 percent royalty.

It also takes title for gas resources from the companies; one interpretation of this provision of the law is that companies would be violating the law if they export gas from the country.

Global companies such as Petrobras, Repsol, Total, British Gas, and BP, which operate in Bolivia, have begun to look at ways to lessen the impact of the legislation on their operations.

Arbitration is one alternative being considered by some companies, but one analyst says that it would probably be difficult for any company choosing that tactic to operate in the country after going through that process.

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May 11, 2005

Dominican Republic exchanges debt relief on bonds

Filed under: Bonds, Americas
Dominican Republic exchanges debt relief on bonds

The Dominican Republic took steps on Wednesday to get some relief on its debt by a $1.1 billion exchange on two bond issues.

This move postpones interest payments due this year and next, and extends the maturity of the country’s debt, thus letting up on its immediate cash burden. The interest payments were added to the principal on the new bonds.

The markets took the deal well, with analysts calling the deal good for the government and an acceptable deal for investors.

The deal was part of the conditions imposed by the Paris Club to bring debt relief to the nation.

Leonel Fernandez, the president of the Dominican Republic called the deal a success even though the government still must reach a settlement with bondholders who did not agree to the exchange.

Bondholders who did agree to the deal will receive $456 million in 9.5 percent amortizing bonds due in 2011 and $574 million in 9.04 percent amortizing bonds due in 2018. The swapped-out bonds had been due in 2006 and 2013.

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May 10, 2005

Brazil media company completes major corporate bond restructuring deal

Filed under: Bonds, Companies, Countries & Regions, Americas
Brazil media company completes major corporate bond restructuring deal

Globo Comunicacoes Participators (Globopar), the leading media company in Brazil, is one step closer to finishing the construction of the largest corporate bond restructuring deal in that South American nation’s history.

On Monday the company entered into an auction process that will refinance $1.3 billion in debt.

Globopar found itself in debt after losses in its cable division in the 1990s and after it could not service its debt after Brazil’s currency was devalued in 2002.

The company has been in negotiations with Brazilian and international creditors for two years to restructure its debt.

In April, holders of Globopar’s bond issues agreed to exchange old debt for new securities or cash. The banks involved agreed to the deal last week.

The auction process will take about a month to complete and will give creditors the choice of access to $200 million in cash payouts or receiving debt worth more than the face value of the defaulted bonds they hold.

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May 5, 2005

Casino supermarket joins with Brazil’s CBD

Filed under: Companies, Americas
Casino supermarket joins with Brazil

French supermarket chain Casino announced on Wednesday that it would increase its stake in and take joint control of CBD, the largest retailer in Brazil.

The deal will cost Casino €407 million ($527 million). In return for that price, Casino will acquire a 50 percent share of voting rights and a 68.8 percent stake of the capital in the holding company that currently controls CBD. Casino’s direct economic stake in the retailer will be 34.4 percent, up from 27.4 percent.

The family of Abilio Diniz, currently the principal shareholder in CBD, will retain the remaining 50 percent of voting shares. Mr. Diniz will stay on as chairman of the board of CBO and will, in addition, become chairman of its holding company.

Casino will have equal representation on the two boards and will increase its operational management involvement in the company.

Brazilian investors seemed to approve of the purchase, as preferred shares of CBD on the SaoPaulo stock exchange gained 5.7 percent after the announcement on Wednesday.

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May 4, 2005

TV Azteca delists

Filed under: Companies, Americas
TV Azteca delists

TV Azteca, Mexico’s second largest broadcaster, announced Tuesday that it plans to delist from the New York Stock Exchange.

This move comes as the network and its chairman Ricardo Salinas Pliego, are fighting securities fraud allegations in both the United States and Mexico.

TV Azteca blamed the delisting on the high costs of complying with the Sarbanes-Oxley legislation requiring that foreign as well as U.S. companies listed on the stock exchange show that they have internal controls in place that will guard against accounting fraud.

Two other companies controlled by Salinas Pliego, one of the Mexico’s largest electronics retailer, will hold shareholders’ meetings to vote on delisting those companies as well.

TV Azteca called Sarbanes-Oxley “excessive regulation” brought on by recent scandals such as those at Enron and Adelphia.

However, some analysts feel that Sarbanes-Oxley is not the real issue for TV Azteca and other Mexican companies that have recently delisted, as Mexican securities laws are moving in the direction of U.S. law in the area of disclosure.

The announcement by TV Azteca caused its shares to fall 7 percent in early trading on Tuesday.

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May 3, 2005

Argentina offers bond in return to debt markets

Filed under: Bonds, Americas
Argentina offers bond in return to debt markets

Argentina will return on Wednesday to the debt market for the first time since that nation’s financial collapse three and a half years ago. The new issue is a modest 1 billion pesos but is seen as a way of returning to normal.

The decision to go ahead with the issue despite continuing litigation in New York over the rejection by a small group of investors of a $100 billion dept restructuring offered by Argentina in February is seen as Argentina’s way of testing market waters after its absence.

According to analysts, there is also a practical reason for the bond offering to be pursued at this time. The Argentine government this week paid out around $370 million on a series of Boden bonds that had come due.

The current bond issue would reach that sum almost precisely if it is fully subscribed. It is believed that most of the new issue would be taken up by local banks and pensions funds, though there might also be interest by some foreign investors.

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April 29, 2005

Mexican government sues over Banamex allegations

Filed under: Americas
Mexican government sues over Banamex allegations

Mexico’s finance minister on Thursday made good on his threat to charge TV Azteca with securities law violations if it broadcast a documentary charging financial and government improprieties in the 2001 purchase of Mexico’s largest bank by Citigroup.

The documentary was broadcast Tuesday night by TV Azteca despite the warning. The finance minister, who had ties to the bank in question, Banamex, before he became treasury minister in 2000, denied that he applied any kind of pressure to halt the broadcast.

A libel write was filed against TV Azteca’s chairman, Ricardo Salinas Pliego, over allegations made in the documentary. It was also announced that TV Azteca and its directors will be fined 27 million pesos ($2.4 million) for eight violations of Mexican securities laws.

The Treasury was also expected to ask the attorney general’s office to charge Salinas Pliego with fraud over charges that the TV Azteca chairman had used a Delaware company he controlled to purchase Azteca’s debt at a huge discount, which was then repurchased at face value for a personal profit to Salinas Pliego of around $109 million.

TV Azteca already has had a fraud suit filed against it by the U.S. Securities and Exchange Commission in that transaction.

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April 28, 2005

Mexico reforms for more IPO listings

Filed under: Markets, Americas
Mexico reforms for more IPO listings

Mexico is in the process of reforming its securities laws with an eye toward getting more companies to list on the stock market there and to give foreign investors more confidence in the Mexican stock market.

In introducing the bill to create the reforms, the country’s treasury minister cited the fact that there are only 149 companies listed on Mexico’s exchange and that in 2004 there were only two new initial public offerings, more than offset by several delistings during the year.

The treasury minister compared Mexico’s market to South Korea’s, which is a nation that has a slightly smaller gross domestic product than Mexico’s but has 1,500 companies listed on its stock exchange. As it stands, most trade on Mexico’s stock exchange is carried out by a few dozen large international companies.

Meanwhile, smaller companies remain in control of the families that founded them. These families have no incentive to go public because they can fund their operations with credit. This ability to finance their businesses without going public is seen as the biggest factor in the Mexican stock market’s lack of growth.

The main change proposed in the law was the creation of a new category, an “investment promotion group” or “sapi”, which would be sort of halfway to a full listing.

Minority shareholders in such a sapi would have full rights, but companies would not be held to all reporting requirements that fully public companies must meet. Investment in sapis would be open only to institutional investors and to private investors who have signed a wavier indicating that they understand the risks involved in their investment.

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Azteca TV alleges irregularities in CitiGroup deal

Filed under: Americas
Azteca TV alleges irregularities in CitiGroup deal

In Mexico, a TV network has produced a documentary alleging that the 2001 acquisition of the bank Grupo Financiero Banamex by Citigroup was beset by financial irregularities and government wrongdoing.

Now TV Azteca, Mexico’s second largest broadcaster, is accusing the country’s finance minister of trying to prevent the program from airing by threatening action against TV Azteca for violation of securities laws.

TV Azteca’s head of news and public affairs, Jorge Mendoza, was allegedly called to the finance minister’s office on Tuesday and given a written demand to refrain from airing the program; if it did not comply, he was told, the attorney general would be asked to take action against the broadcaster.

The documentary aired Tuesday night. Banamex has called the charges made by the documentary “false and baseless.” Wednesday, TV Azteca’s news anchor accused the finance minister of attacking freedom of speech. TV Azteca has filed formal charges in the dispute.

Meanwhile, the owner of TV Azteca, Ricardo Salinas Pliego, is already investigation in Mexico over alleged wrongdoing in relation to his mobile phone company, and the U.S. Securities and Exchange Commission has already brought charges against him in that case.

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April 25, 2005

Air Canada buys into Boeing

Filed under: Equities, US, Americas
Canadian Airlines returns to Boeing

U.S. aircraft manufacturer Boeing pulled off a significant victory over its European rival Airbus when it scored an order for 32 wide-body planes, including 14 787s, from Air Canada.

This is a turnaround for the Canadian airline, which had previously replaced its whole Boeing fleet with Airbuses and Bombadier CRJ regional jets.

Air Canada’s chief executive said Monday that the 787 would be the more economical aircraft, saving about 30 percent in fuel efficiency and costs for maintenance compared to the 767s currently in use.

Air Canada will buy 14 787s and 18 777s from Boeing, for a total of around $6 billion. Deliveries of the 777s will begin next year and the 787s will be delivered beginning in 2010. Air Canada also took options for 46 additional 787s and 18 777s.

With 217 total orders and commitments for the 787, Boeing’s shares advanced nearly 3 percent to $59.50 in early trading on Monday.

Air Canada has seen rapid expansion of its Asian and Latin American routes due to passenger preference to fly into Toronto and Vancouver when traveling between Asia and the Latin American countries since U.S. visa and security restrictions have tightened.

The airline recently announced plans for daily non-stop flights to Beijing, Shanghai, and Guangzhou.

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