(MENAFN- InvestorIdea)
May 22 2015 (www.investorideas.com newswire) CHILE: Economics and Politics - Presidential´s annual speech confirms the reform agenda. Yesterday President Bachelet gave her second May 21st presidential speech. The highlights were the maintenance of the government´s commitment to reforms the higher fiscal spending required to fulfill the new proposals and the lack of clarifications regarding the new constitutional process.
On April 29th the President announced a new Constitution. The Public Constituent Process will begin in September through public dialogue debates consultations and councils. However yesterday's speech did not clarify who will make the final approval (Congress or plebiscite) and how the discussion will be structured.
The educational reform was one of Bachelet's presidential campaign main pillars (along with tax and constitutional reforms). Starting 2016 the government will ensure free access to 60% vulnerable students attending technical training centers (CFT) professional institutes (IP) or the Council of Rectors´ Universities (Cruch) all of which need to be non-profit entities. This will benefit nearly 264000 students and it could increase the government spending by USD 500mn yearly.
Among the rest of yesterday's announcements we highlight:
The labor education should be approved during the second semester of this year.
The government will create a new ministry of science and technology.
Retirees will no longer pay the 5% health contribution. This payment will be made by the government.
A bill to adequate the actual General Banking Law to international banking standards will be sent to Congress in 2H15
The discussion regarding the draft law that is intended to strengthen the Superintendence of Secure Values (SVS) will continue during the medium term.
All public workers that receive working fees and work for an indefinite time will come into contract.
These new announcements (especially the ones regarding educational gratuity and health payments) will imply higher pressure on fiscal spending. The tax reform approved last year was intended to finance the educational gratuity and other fiscal spending. However in a scenario of lower copper price and slow economic growth these new proposals make more difficult to achieve a structural fiscal balance of 0% GDP by 2018.
Company News
Latam Airlines will issue an additional bond up to USD 300mn to refinance TAM's 9.50% due 2020
(LATAM AIRLINES: HOLD; T.P.: CLP 7800)
Latam Airlines announced its intention to issue long term senior unsecured notes (144A/REGS) in the US not specifying the total amount involved. Funds will be partially used to refinance the existing TAM's 9.50% senior guaranteed notes due 2020 (USD 300mn) and for other general corporate purposes. Together with the TAM 2020 tender offer the company announced a consent solicitation form for these notes that aims to change and eliminate certain provisions (covenants) for TAM 2020.
COLOMBIA
Economics and Politics
Imports decreased by 5.5% y/y in Mar-15. YTD trade balance deficit stands at USD 4.04 bn
According to DANE Colombia's external purchases contracted for the second month in a row during Mar-15 (-5.5% y/y) from USD 4.91 bn in Mar-14 to USD 4.64 bn.
Now if imports' data is analyzed by its economic destination this month's behavior was mainly explained by the drop of external purchases of both raw materials and intermediate products (-9.6% y/y) and capital goods and construction materials (-6.1% y/y) subtracting 6.4pp to the overall growth. On the other hand consumption goods posted a 4.1% y/y advance led by the increase in purchases of non-durable goods (+10.4% y/y) suggesting a still strong private consumption despite the current low level of confidence. Additionally it is worth noting that despite the strong fall of oil prices and the ongoing expansion process of Cartagena's refinery the YTD trade balance of refinery activities remarkably improved during 1Q15 (29.1% y/y).
With this result in addition to exports' drop during Mar-15 (-22.8% y/y) which continues to be mainly explained by the plunge of oil prices the YTD trade balance deficit stands at USD 4.04 bn. However the latest data suggests that the expected gradual adjustment in the trade balance is already on its way given the strong COP depreciation and the deceleration of domestic consumption.
Company News
Avianca Holdings released operating results for April posting a 9.5% y/y growth on passengers carried
(AVIANCA: BUY; T.P.: COP 4300)
The airline transported 2.23 mn passengers during April 2015. Domestic markets grew 9.6% y/y while international market increased 9.4% y/y. Capacity measured in terms of ASKs (available seats per kilometer) grew 8.4% y/y. Finally the load factor reached 77%.
We highlight a positive performance in terms of passenger growth (9.6% vs 7.9% average in 1Q15) while load factor increased 0.6% relative to the same period of 2014. Finally we expect the company to report financial results for 1Q15 next Thursday May 28th 2015.
A new BoD of Exito will be elected in an extraordinary shareholders meeting
(EXITO: HOLD; T.P.: COP 28300)
Exito called an extraordinary meeting on June 11th 2015 to elect a new BoD following the decease of director Nicanor Restrepo.
Pacific announced a consent solicitation to amend senior notes and a possible debt swap
(PACIFIC RUBIALES: UR)
As previously informed the company announced it has reached an agreement with Alfa and Harbour for these two firms to acquire 100% of the outstanding shares of the oil & gas company not currently owned by Alfa. Following this announcement Pacific released a formal solicitation for current bondholders to accept an amendment to the indentures governing the notes (the amendment is a condition precedent to the closing of the acquisition agreement). The company is proposing to amend the specific clause regarding the definition of "change of control" so the acquisition arrangement shall not constitute a change of control. Under the current conditions the transaction would require the acquirers to repurchase all the notes at a price equal to 101% of the principal amount. Further the company is asking to modify the definition of total indebtedness to subtract the value of cash and equivalents while increasing the permitted leverage ratio from 3.5:1.0 to 4.5:1.0.
The proposals would pass with the favorable vote of bondholders representing at least 50% of the outstanding notes and the company is offering a payment of USD 5 per USD 1000 of aggregate principal amount.
Finally the company is offering holders of the 5.375% 2019 notes to exchange them for a new series of 7.25% notes due September 2021. This offer is expected to commence after the expiration of the consent solicitations to amend the terms of the notes.
PERU
Economics and Politics
Government passes fourth installment of reactivation package – will ease regulation for obtaining permits and push forward investment projects
President Humala presented the fourth and final tranche of the policy package designed to re-invigorate Peru's economic growth through easing up legislation. The measures passed aim to simplify processes for obtaining environmental licenses as well as permits for investment projects. Most importantly the Environmental Impact Assessment (EIA) will now concurrently process the necessary permits to begin to carry out works on a project – whereas previously the two permits were processed separately creating an unnecessary period of inactivity within the project cycle reaching up to 3 years according to the Ministry for Economics and Finance (MEF). Overall the new legislation will help to streamline the process of obtaining permissions particularly in the mining and construction sectors pushing forward project advancement while at the same time creating a more attractive investment climate.
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