LatinFinance - March/April 2016 - 8

NEWS
BONDS

Latin American borrowers are turning to euro-denominated debt issuance
to access competitive funding, while corporates are largely staying on the
sidelines. By Mariana Santibáñez

Diversification play
Latin America year-to-date debt
volumes have been modest
amid broader volatility and
expectations of a possible
hike in US rates, with only the
highest-rated Latin American
borrowers accessing the crossborder markets.
Predicting volume is
difficult, bankers say, but they
expect more Latin American
sovereigns and corporates to
turn to the European bond
markets for capital fundraising.
Latin America year-to-date
dollar-denominated volumes
stand at a modest $8.8 billion
from four borrowers, according
to Dealogic, including Pemex's
$5 billion multi-tranche trade
that printed at generous
concessions to the Mexican
sovereign and its own curve.
Euro-denominated debt
issuance, meanwhile, is
catching on, with four Latin
American borrowers issuing
$5.45 billion dollar equivalent in
the euro market through March
2. Issuers include sovereigns
Chile, Mexico and Peru.
"Rates are lower in Europe,"
says a Latin America syndicate
banker.
"Some issuers might have
natural European cash flow
needs and euros represent a
diversification play in a time of
volatility when it is good to tap
different markets and not rely
on the dollar markets."
Colombia is expected to
become the next sovereign to
access the European market.
BBVA, Goldman Sachs and

JPMorgan have been taking the
Baa2/BBB/BBB rated borrower
on fixed income investor
meetings in Europe in early
March. Colombia's last issue
in euros was more than 14
years ago.
Corporate borrowers
are also looking at funding
opportunities in euros.
Mexico's Femsa is on track to
become the first Latin America
corporate borrower to tap the
European market this year. The
company scheduled meetings
with fixed-income investors
in Europe in March, ahead
of a possible offering. BBVA,
Credit Suisse and Deutsche
Bank have been hired to take
Femsa to Europe to meet
the fixed-income accounts.
Aside from attractive rates
in the euro market, Femsa
has euro exposure through
its ownership of the second
largest equity stake in Dutch
brewer Heineken.
Looking ahead, a eurodenominated bond could
be an option for Baa2/BBB/
BBB rated Uruguay, which
has said it intends to issue $1.5
billion in the international
markets this year. Elsewhere,
Panama closed an RFP in
mid-January and could go to
the cross-border bond markets
before the end of March.
Among the higher yield
sovereigns, Argentina could
be a key contributor to Latin
America bond volumes and
issue up to $15 billion in new
bonds to pay holdout creditors.

8 L ATINFINA NCE.COM - March/April 2016

DCM rank by volume, year to February 29
Santander in front
Rank
1
2
3
4
5
6
7
8
9
10

Bookrunner
Santander
JPMorgan
BofA-Merrill
BBVA
Citi
HSBC
BNP Paribas
UBS
Credit Suisse
Morgan Stanley
Total

Value ($m)
2,184
1,996
1,899
1,752
1,398
1,109
1,064
941
934
748

# Deals
7
2
3
4
3
4
2
3
3
1

15,982

20

Source: Dealogic

A deal could come to market
as soon as April, if Argentina's
legislature endorses the
agreement and repeals laws
that prohibit the government
from making payments to
holdout creditors.
On the corporate side,
volatile conditions have
effectively shut out many
corporates from both debt
and equity new issue markets.
Companies are assessing other
ways to address existing debt
levels, however, and distressed
companies are looking at
deleveraging tactics.
At least five Latin American
corporates have initiated
bond buybacks this year, with

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two more -Santander Chile
and Hypermarcas -adding
their names to the list. Liability
management trades remain
open to corporate issuers, and
more deals are expected to
come to market in the next few
months.
Latin American sovereigns
have also been active in liability
management. Chile in January
used the dollar proceeds
from cross-border bonds to fund
a cash tender offer to buy back
some of its 2020, 2021, 2022 and
2025 notes. Investors holding
$3.295 billion in the four series
were given the option to switch
into a new 10-year dollar bond or
take cash. LF

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Table of Contents for the Digital Edition of LatinFinance - March/April 2016
