Port of Chancay
Volcan Cia Minera, the Peruvian zinc miner that was recently acquired by Argentine group Integra Capital, said it is pushing ahead with plans to sell non-core assets as it talks with creditors to refinance a pile of debt coming due in the coming years.
The company, in which Glencore sold a controlling stake last month, is looking to divest its holding in a Chilean cement maker as well as real estate near the new Peruvian port of Chancay on the Pacific coast, said CEO Luis Fernando Herrera. It has already sold two hydroelectric plants for more than $78-million.
Between the Chilean asset and the project near Chancay, Volcan expects to raise more than $200-million, Herrera said in an interview on the sidelines of the FII Institute conference in Rio de Janeiro last week. The port lands for commercial and logistics projects has a lot of value for a developer, but “Volcan isn’t that developer,” he said.
“We need to strengthen the capital structure of the firm since there are a lot of maturities coming due in the next three years that require immediate attention,” Herrera said. “We’re negotiating with our group of syndicate banks and bondholders which is advancing well. We hope to provide updates soon to the market. We’re very optimistic.”
The idea is to extend maturities without imposing losses through a haircut, with the main negotiation around the interest rate, he said. The company is hoping to secure support from at least 90% of bondholders and will need all of the banks to back the plan.
“Possibly before the end of the summer we’ll be able to communicate developments to the market,” Herrera said.
BOND RALLY
Investors have welcomed the sales amid growing confidence Volcan will be able to meet its upcoming debt maturities. Lucror Analytics is now recommending that clients buy bonds of Volcan maturing in 2026.
“We believe that the bonds will recover further after the planned debt payments in June and August are made,” Lucror credit analyst Josseline Jenssen wrote in a note Monday, raising her recommendation to buy from hold. She expects the refinancing process to take place “soon without imposing losses on creditors.”
The bonds last changed hands at near 72 cents on the dollar, according to Trace data. They have been aided by Integra’s pledge to honor obligations.
Integra, run by Jose Luis Manzano, an Argentine with interests in oil and gas, mining and media, bought control of Volcan from Glencore for $20-million, assuming its debt load in the process. Net debt stood at $711-million at the end of the first quarter.
Herrera previously worked at Glencore in Switzerland and oversaw the divestment of zinc projects in South America including Colombia, Bolivia and Argentina. The last project to be sold was the Peruvian asset and he left the global commodity trader to join Volcan as CEO last month.
Beyond the asset sales, Volcan, which Herrera said produces some 250,000 tons of zinc per year, is planning to put a renewed focus on its core portfolio of transition metals to boost output and efficiency, he said.