UMS Brings $1.25 in Exchange Warrants

Mexico plans to sell warrants with a notional value of $1.25bn that will allow investors to exchange foreign currency debt for peso debt. On April 2 and 3, investors will be able to purchase two types of warrant that allows them to trade in 21 series of dollar, euro, deutschemark and Italian lira-denominated bonds with maturities between 2009 and 2034 for local bonds. The first warrant has a notional value of about $1bn and offers peso-denominated bonds due 2014, 2017 and 2036. The second is worth roughly $250m and offers 2017 and 2035 debt denominated in UDIs. Holders of the warrants will be able to receive their new bonds on October 9. This is the first Mexican warrant transaction to allow swapping into UDIs, as well as the first time the liquid global 2034s will be involved, according to a banker on the deal. This is the fourth sale of warrants since 2005. The government has exchanged more than $4bn in foreign-currency debt for peso bonds in the last two years. Barclays and Merrill Lynch are managing the transaction.

Peru to Prepay IDB, World Bank Debt

Peru plans to prepay about $1.1bn of its debt to the World Bank and IDB by mid-year, according to local news and wire reports citing finance ministry official Jose Miguel Ugarte. It will use treasury funds to finance the repurchase of $620m in debt from the World Bank and $497m from the IDB, and is also considering the sale of new PES-denominated debt. Peru repurchased $838m in outstanding Brady bonds March 7. The planned buyback will be Peru's biggest since a $1.8bn repurchase of Paris Club debt in July.

Cresud Raises $288m in Rights Offering

Cresud, the Argentine holding company for IRSA and a number of agricultural assets in Brazil and the Southern Cone, completed a rights offering with existing investors Tuesday that grossed it $288m through the sale of 180m shares. The deal saw strong demand from existing shareholders, which meant new investors could not participate in the offering, Alejandro Elsztain, CEO, tells LatinFinance. Of the total shares offered, 60% were distributed in the form of ADS at $16, while the remainder was sold in the form of locally listed stock, at ARP5.04. Both the ADS, which represents 10 local shares, and each local share also carry a warrant that permits holders to buy an additional share at a 5% premium. “People are very interested in our track record with commodities. There are a lot of funds talking about investing in agriculture and commodities now, but we have the experience to show for it,” says Elsztain. The CEO says the proceeds are being used push into new markets, including Bolivia, Paraguay and Urugay. Cresud, which owns a 24% stake in Cactus Argentina, a feedlot whose co-investors include Tyson Foods, says Elsztain. That business is also set to grow and might draw some of proceeds he says. Citi, Deutsche and Raymond James led the offering.

LatAm, Brazil Equities Among Favorites: ML

LatAm is the preferred emerging market of choice for global equity investors in the next 12 months, according the most recent Merrill Lynch investor survey. And Brazil, along with Russia, is the top rated BRIC country, says the report, which polled 193 managers representing $676bn in AUM between March 7 and March 13. While managers were very underweight in LatAm in January, their average position changed over February and in March the region enjoys the only overweight position. Meanwhile they are neutral in EMEA and underweight in Asia. Within the BRICs, Brazil’s overweight rating has increased since January, while Russia’s has decreased from a dominant position. India and China have seen underweight positions all year so far. Brazil and Russia also enjoy the highest country allocations within all EM, followed by Thailand, Indonesia and Malaysia.

Merrill Launches Local Debt Indices

Merrill Lynch is launching new local EM sovereign debt indices to track the performance of EM sovereigns debt denominated in the issuer’s local currency. “The fact that we are launching this is a reflection of the growing importance of the local debt markets to institutional investors outside of the issuer’s domestic markets,” Phil Galdi, head of Merrill’s global bond index group in New York, tells LatinFinance. “These markets have grown in size and now represent an important asset class that has offered strong historical returns with low correlation to other asset classes,” he adds. The series includes three new indices: The Merrill local debt markets plus index is a broad composite index designed to track local currency sovereign debt at A1 or lower on average; the Merrill net cap-weighted liquid local debt markets index represents a liquid basket of fixed rate bonds with country allocations based on relative capitalization weights in corresponding broad country indices. The Merrill net equal-weighted liquid local debt markets index meanwhile represents a liquid basket of fixed rate bonds with equally weighted country exposure. They are aimed at institutional investors.