The transaction is structured as a non-revolving committed credit line. The loan is expected to have a term of five years, calculated from the date of the first disbursement, with the principal repayment structured as a single “bullet” payment due at maturity. Interest will accrue at a variable rate indexed to the IBR rate, per the terms agreed upon with the lender. The credit line will allow for drawdowns over a period of 12 months following the execution date of the loan agreement.

The loan from by the state controlled petroleum company from a Colombian private bank is roughly $180.3 million USD.

The funds raised from this transaction are designated for non-investment expenditures, aligning with the terms outlined in Minhacienda’s Resolution and the company’s established financing plan. Ecopetrol confirmed that it has fulfilled all internal procedures and approvals required to execute the loan agreement.

Minhacienda reviewed and authorized the terms of the draft agreement, and the loan documentation includes standard provisions that define borrower default events. These include, but are not limited to, failure to pay principal or interest, any event potentially impairing the borrower’s repayment capacity, issues affecting the integrity of its financial information, and the breach of contractual obligations. In the event of such a default, the lenders would possess the right to demand the early repayment of the loan, in accordance with the procedures specified in the agreement. Conversely, the draft agreement also grants Ecopetrol the right to seek recourse against the lenders in the event of a failure to disburse the loan.

Ecopetrol reported that the spread rate secured for this committed credit line is the lowest obtained in the local market by the company. The company views the terms as an affirmation of support from the domestic financial sector.

The committed credit line is anticipated to provide Ecopetrol with a reliable and flexible source of liquidity. The company projects this will contribute to its overall financial stability, strengthen its cash position, and potentially convey a positive signal to credit rating agencies. The company noted that securing favorable financing terms occurred despite what it characterized as challenging market conditions.

Early in the week, focus was on Colombia’s first quarter GDP number (0.7%), which was above estimates. Industry (-5.9%) and commerce (-0.8%) continue to struggle, but the public sector (5.3%) and agriculture (5.5%) reported positive numbers. Construction (0.7%) finally rose, but the sector needs to offer much more in order to be the economic driver it should be.

The National Administrative Department of Statistics (DANE) also reported the latest real sector data for March, with manufacturing production (11.1%) and retail sales (5.6%) falling significantly once again. These compute with both the GDP and industrial activity data, not to mention Banco de la República’s continued stubbornness on reducing rates at the appropriate rhythm. The government has already stated that if the central bank doesn’t breathe life into the economy, it will via raising the debt ceiling — or putting some flex into the fiscal rule.

However, reacting to this, Fitch Ratings stated that tampering with the fiscal rule would only hinder the nation’s hopeful return to investment grade. They added that the same fiscal deficit was part of the reason that the administration of former President Iván Duque lost the investment grade in the first place.

Colombian David Velez has created a regional phenomena with Nubank, albeit he had to go to Brazil to do it, however his homeland has proven to be less welcoming. This week Velez spoke of the complicated regulatory environment in Colombian and the complications surrounding the banks plans to expand further.

Perhaps that is why he started in Brazil, a country that is light years ahead when it comes to its financial architecture and authorities that are far more enlightened when it comes to providing a more and efficient environment for clients.

Superfinanciera of Colombia is jurassic by comparison —  fearful of change — a fact borne out by its intransigence as Bolsa de Valores Colombian stock exchange has slowly died in front of our eyes, with the only recourse being to salvage itself via nuam exchange. Although, no doubt, Superfinanciera will have a say along the way.

As for the banking sector, it has been a high-cost oligopoly — for decades dominated by Bancolombia, BBVA, Grupo Aval and Banco Davivienda — with Asobancaria seemingly happy with the current situation. There is much chatter about open finance, etc. — but it will only happen on the terms of the current dominant players.

Colombia needs 10 neobanks, as well as a raft of other financial institutions, to both lower fees and improve client attention.

There is much chatter about startups and fintechs.

But most lack the size or expertise to compete with the big boys — and many will sink without trace.

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Meanwhile, speaking of the central bank, Banco de la República left rates at 13.25% at its meeting this week. No surprise. And it released its latest economic forecasts, lowering their 1.0% GDP estimate for 2023 to 0.9%. This looks conservative — as does the 1% projection for 2024, In terms of inflation, the bank is looking for 3% at the end of 2024. CPI is now falling, due to higher rates, a stronger peso, and falling food prices.

National Administrative Department of Statistics (DANE) reported export date for June ($3.98 billion USD) was in line with expectations but down 27.5% year over year. In FOB terms, the driver was the commodity space (-38.9%) with both coal (-48.5%) and oil (-32.6%) suffering. On the brighter side(?), oil exports rose 14% in tonnage terms, but this didn’t help sales given the downturn in Brent prices. Coal fell 17.2% in tonnage terms and accounted for over 100% of the total decline in tonnage, which fell 7.8% year over year.

The other significant macro number was the Banco Davivienda PMI reading for July (48.4), which continued in the red and was down from the June print (49.8). Interestingly, XM reported that for June, not a direct comparable, energy demand rose 6.02% year over year. The breakdown was +8.2% (Homes & Commerce) and +1.24% (Industry) in a slowing economy. However, much of this can be explained by the arrival of El Niño, as the Caribbean Coast saw a 11.84% increase as the temperature rose.

According to FENALCO – ANDI – Asociación Nacional de Empresarios de Colombia, new vehicle sales for June fell by 40% to 13,091. Much of this is down to the peso weakness since 2021. The question now, with new car prices falling, is how quickly the strengthening peso will feed through to the showroom?

In the latest EL Niño decree, authorities will impose a 1,000 Colombian peso ($0.25 USD) on the electricity bills of the top three socio-economic groups (Stratos 4, 5, and 6) and the funds will be delivered into a fund to help La Guajira’s poorest sectors. Industry will contribute a further 5,000 pesos ($1.25 USD) per bill. The total raised should be $12.4 million USD (look out for more to come).

The reform process saw a few headlines but no actual developments.

The peso has fallen to 4,100 to the US dollar this week amid a regional selloff. The latest report from Fitch Ratings regarding the US was the root cause, and the Colombian peso was ripe for profit taking.

The equity market traded anemic volumes once again as stocks were pushed around by external events.

That’s about it for now. There are so many long weekends that many didn’t realize there is another one pending!

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Today, we have the Banco de la República central bank meeting and it’s hard to imagine any change to the 13.25% overnight rate — but there will be a lot of focus on the tone of the press conference when it comes to future rate cuts. The committee will also publish this week their latest Monetary Report.

The National Administrative Department of Statistics (DANE) will release June unemployment data today (estimated to be 11.6%), and while these numbers have been solid in 2023, there will be close interest in the year-over-year comparison. Are we still creating more jobs than we are losing?

Elsewhere on the macro front, we have Banco Davivienda’s PMI data for July. Last month (49.8) the economy was in the red. What will this time hold?

Finally, we have the export data for June. A total of $3.9 billion USD is anticipated, but the devil will be in the detail. Are oil sales still struggling? Is coal still propping up the data? Are any other sectors showing signs of life?

READ MORE: Son of Colombian President Gustavo Petro Arrested On Corruption Charges

Reforms will no doubt be in the headlines this week as new and revised government proposals are expected to be submitted to Congress.

Related to that, the Colombian peso, which supposedly will collapse if the reforms make headway, remains the best performing currency on the planet (largely due to 2022 fourth quarter panic selldown). It seems unlikely that will change, with US rates seeming to have topped out and oil back close to $85 a barrel. Apart from that, the institutions are performing well and therefore any of the very necessary reforms will be measured as opposed to radical.

As for the equity market, I really need to write in depth on the subject, there is little hope of any momentum change. There appears to be a complete vacuum when it comes to leadership around the issue. The Bolsa de Valores de Colombia (BVC) appears more preoccupied with the Chile/Peru merger process, which is slipping ever further behind schedule and Asobolsa have come up with absolutely zero solutions. Surely, change is needed somewhere.

Other themes to keep an eye on:

• More decrees related to El Niño
• Any pronouncements from new Energy Minister
• Developments in Grupo Éxito sale process.

Finally, happy news as the Colombian women’s football team won their match at the World Cup versus Germany. This was a shock but perhaps even more so considering how hard the ladies had to struggle for recognition, sponsorship and respect in Colombia. Great stuff.

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Now the earth is properly moving.

Nine years ago, the Odebrecht bribery scandal rocked Latin America — and Colombia was no exception, although little came to pass. Óscar Iván Zuluaga, the Central Democratic Party presidential candidate for 2014, this week resigned from the party after evidence that Odebrecht money had been found in his campaign finances. Other members of the Central Democratic Party have quickly distanced themselves, but there could be a lot of collateral damage as this one is registering much higher on the Richter scale.

Away from politics, it was a very quiet week indeed.

Banco Davivienda PMI for June came in at 49.8, and it continues in the “red” after the 49.9 last month.

The National Administrative Department of Statistics (DANE) reported that exports for May fell by 2.8% year-over-year to $4.5 billion USD, which completes six straight months of declines. The main reason for the fall (FOB terms) was the commodity sector (which dropped 9.1% year-over-year) and in particular oil/derivatives (which fell 34.1%). There was a 69% snapback in coal exports, but that is hardly a product that any country wants to be relying on! All eyes will again be on imports in a couple of weeks. How big will the trade deficit be this time around?

While oil exports struggled, production for May (773k bpd) rose 3.49% year-over-year. The number was down slightly month-over-month, but the year-to-date average production was up 3.48% to 771k bpd. Perhaps now the 2022 urban myth that Petro was set to dismantle the oil sector can be left behind.

On the markets, it was a very quiet week — not helped by July 4 holiday — with little equity activity. And the only Colombian peso activity was due to the strong employment number in the United States on Thursday, which caused it to drop 2%. Nonetheless it’s still looking very solid at the 4,200 COP level to the dollar.

There was no new news on Grupo Éxito, but Groupe Casino continues to struggle in Europe and unquestionably they will be looking to raise the money as soon as possible.

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The downgrade of the sovereign follows the withdrawal of a fiscal reform introduced to Colombia’s congress in a context of high spending pressures, which has resulted in a significantly lower likelihood of Colombia improving its fiscal position following a recent and marked deterioration. Given the country’s high external vulnerability and moderate economic profile (balanced by adequate institutions and monetary credibility), Colombia’s debt, stabilizing at about 60% of GDP during 2021-2024, and relatively large fiscal deficits are no longer consistent with an investment-grade (‘BBB-‘ or higher) foreign currency rating.

The downgrade of the two government-owned development banks reflects their very important economic roles and links to the government. Similarly, the ratings on the sovereign cap those on Banco Davivienda, given the commercial bank’s large exposure to country risk and the highly sensitive nature of its businesses to sovereign stress. Finally, S&P says the rating actions do not reflect a deterioration in the entities’ stand-alone credit profiles (SACPs).

See Also: S&P Lowers Colombian Currency Rating to Junk: BB+

One of the motions the air carrier filed in connection with the commencement of its voluntary reorganization proceedings includes a list of its five largest creditors, that includes: the name of each creditor, an estimated amount of such creditor’s claim and a description of the collateral granted, shown below:

Other major creditors called out in the El Tiempo article include Citibank, IAE International Aero Engines AG, Banco Davivienda, General Electric & CFM International, SAP Colombia, Banco Agrícola de El Salvador, Terpel, Lufthansa Group, Banco Cuscatlán de El Salvador, Puma Energy, Microsoft, Chevron Petroleum & Bancolombia.

Fitch Downgrades Avianca’s Issuer Default Rating to ‘D’

Fitch Ratings has downgraded Avianca Holdings S.A.’s (Avianca) Foreign and Local Currency Issuer Default Ratings (IDRs) to ‘D’ from ‘C’. Fitch has affirmed Avianca’s senior unsecured bond issuance at ‘C’/RR6’ and the secured notes at ‘C’. Fitch revised the Recovery Rating of the secured notes to ‘RR6’ from ‘RR4’, reflecting the impact of the coronavirus on the sector and diminished recovery values of aircraft that were used as collateral for the secured bonds.

The downgrades to ‘D’ follow Avianca’s announcement that it has filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. This process will result in material changes in the terms and conditions of its debt. Once the airline exits the administration proceedings, Fitch will assess its new strategy and restructured financial profile and re-rate Avianca accordingly.

Key Ratings Drivers

Voluntary Reorganization Proceedings: Avianca announced on May 10, 2020 that it had filed for bankruptcy protection from its creditors due to liquidity pressure it faces from the Covid-19 pandemic. Avianca did not pay $67 million USD due on its outstanding unsecured bonds on May 10, 2020 and will not pay the coupon payment of its senior secured bonds due 2023.

Covid-19 Lockdown: Avianca has temporarily ceased to operate all regular passenger flight operations due to a decision by several governments to close airspace as of March 25, 2020. The return of operations is still uncertain. Avianca has offered a voluntary unpaid leave program, and around 14,000 employees have accepted this offer. This led to a decline in the company’s revenues by more than 80% and has squeezed its liquidity position. Avianca’s operating cash flow remains highly uncertain for 2020, as it is unknown when the company will be able to restart operations and what restrictions may be placed upon operations at that time.

Wilmington bank images from Twitter.

Specifically, Davivienda will use the funds to provide financing for mortgage loans within two public housing development programs in Colombia, Social Interest Housing (VIS) and Priority Interest Housing (VIP).

The institution’s loan to the Bogotá-based bank has a period of up to 5.5 years with a single payment at maturity.

“The IDB Invest loan will allow Banco Davivienda to increase the reach of its operations, particularly the financing of VIS, a segment that requires longer repayment periods,” said IDB in a statement.

The group added that, while the country has “achieved a significant reduction in housing deficit indicators in recent years,” many Colombians still lack access to “adequate housing finance.”

The Washington-based regional development bank added that “increasing mortgage offerings and establishing a robust housing finance system that facilitates access to formal housing is a priority for the country.”

(Photo credit: mastersenaiper / Pixabay)

The improved outlook mirrors a similar revision Fitch made to the nation of Colombia’s sovereign rating earlier this year and reflects the Bogotá-based financial institution’s “resilient and stable financial performance that has proven effective and consistent during periods of market turmoil,” stated Fitch in its assessment.

Compared to similarly rated banks, Davivienda has adequate capital, sound asset quality, and a conservative risk management approach that all support its “clear” long-term strategy, according to Fitch Ratings. The bank’s geographical diversification and eye for cost control also favorably impact its outlook improvement from negative to stable.

On the other side of the ledger, Davivienda’s capitalization level does present a credit weakness along with its Fitch Core Capital ratio of 10.06% as of March. An increase in delinquency levels has also “weighed on profitability,” while non-performing loans have been rising, retail and mortgage portfolios have experienced a slight deterioration, and a sluggish Colombian economy has led to “a cyclical deterioration in impaired loan ratios,” according to Fitch.

Still, Fitch Ratings’ overall assessment shows renewed confidence in the bank, which has proven resilient in its Colombian operations and shown positive signs within its business outside of the country. “Asset quality has improved in Central America and is now on par with that of Colombia,” stated Fitch. “Davivienda boasts a wide deposit base of well-diversified, stable, and relatively low-cost funds … [and] has established market access to international and local debt markets. As such, Davivienda’s loans-to-deposits ratio is higher than that of its peers, as Davivienda periodically uses capital markets to better match its assets and liabilities structure.”

In full, Fitch Ratings has set the following ratings for Banco Davivienda:

Banco Davivienda S.A.

• Long-Term Foreign and Local Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-Term Foreign and Local Currency IDR at ‘F3’
• Viability rating at ‘bbb’
• Support Rating at ‘2’
• Support Rating Floor at ‘BBB-‘
• National Long-Term rating at ‘AAA(col)’; outlook stable
• National Short-term rating at ‘F1+(col)’
• Senior unsecured debt at ‘BBB’
• Subordinated debt at ‘BBB-‘
• National scale Senior unsecured debt at ‘AAA(col)’
• National scale Subordinated debt at ‘AA+(col)’

GRUPO BOLIVAR S.A.

• National Long-Term rating at ‘AAA(col)’; outlook stable
• National Short-Term rating at ‘F1+(col)’
• National scale senior unsecured debt issuance for COP600 billion at ‘AAA(col)’

Photo: Banco Davivienda headquarters in Bogotá, Colombia. (Credit: Jared Wade)

As the winner, the Bogota-based company will now receive assistance from the famed Springboard accelerator, which has helped turn many companies from small startups into big-money success stories.

Second place went to Kiwi Campus, an on-demand delivery service for food and other goods that works on college campuses in Colombia — including University of Los Andes, National University of Colombia, and Javeriana University — as well as in the United States, Chile, and Mexico. CityTaxi, a cab-hailing app and member of the Wayra accelerator portfolio, took third prize.

(Photo Credit: Colombia Startup)

In all, more than 1,500 attendees gathered in the capital for the fourth edition of Colombia Startup, an annual event that brings leading entrepreneurs in the country together with international investors and experts. At least 11,000 people live-streamed the event from across the world.

Event organizers were also proud to announce that they exceeded the 400 mark for official meetings between investors and entrepreneurs, a new record for Colombia Startup. Each of the 19 startups selected before the event got the opportunity to sit down in front of 25 investors to make their case for funding.

The event was also record setting in terms of the number of companies that showed up. “Colombia Startup is one of the most important events for entrepreneurs in the country, and we want to make it one of the most important in Latin America,” said Alfonso Gomez, CEO of Telefónica Colombia and president of the forum. “This year, the call to entrepreneurs broke the record by having 644 registered enterprises. Colombia Startup is a unique space for high-level networking and accessing potential investors.”

The conference kicked off with a reception on Thursday, October 6 in at the prestigious Casa Egresados Uniandinos before getting down to business the following day at the Bogotá Chamber of Commerce headquarters in the neighborhood of Salitre.

Some of the biggest guests were expected to include: Juan Gorricho of The Walt Disney Company, Andrés Hernández of Google, Gladys Corredor of Banco Davivienda, Carlos Ángel of Uber, and Daniel Arango of Colombia’s Ministry of Commerce, Industry, and Tourism.