Latin Finance - March/April 2010 - 63

Colombia local debt Off Peak, But On Track by Taina Rosa fter a record 2009, Colombia may see a slight slowdown in the volume of bonds issued by local companies. But that does not mean there will be no activity, as liquidity remains buoyant and investors are hungry for opportunity. Colinversiones, Banco de Bogotá, Carvajal and Codensa were already in the pipeline as of February. Last year, Colombia’s local market was surprisingly brisk, especially versus other developed markets like Mexico or Brazil. Looser monetary policy, falling TES rates and lower inﬂation made it more enticing for issuers to go to the domestic market. Relatively hostile cross-border markets, particularly in the ﬁrst half of 2009, made the choice to stay at home an easier one. In 2010, however, bond activity is expected to take o early in the year. Issuers will want to get ahead of tighter monetary policy, as well as rising TES rates and inﬂation. They will also seek to avoid any potential volatility from legislative and presidential elections, which take place in March and May, respectively. “In 2010, especially in the fourth quarter, we expect monetary policy tightening to begin, which could mean that there will not be as many issues as in 2009,” says Laura Ramírez, a DCM banker with Bogotá-based Correval. “However, we do expect there to be a lot of bond deals in 2010,” she adds. This year may not see the record-breaking ﬂow of local bonds Colombia enjoyed in 2009. But brisk activity is expected as liquidity persists and investors continue to seek assets. Colombia DCM League Table Bancolombia is bond king in 2009 Bank Bancolombia Citi Correval Corﬁcolombiana Alianza Valores Interbolsa Santander Invercor Serﬁnco BBVA Source: Dealogic Value $m 977.57 914.42 638.45 370.52 364.44 351.50 282.84 230.92 194.85 192.31 No. of Issues 13 14 11 3 6 5 2 7 7 2 % Share 19.60 18.30 12.80 7.40 7.30 7.00 5.70 4.60 3.90 3.90 Hawkish Policy Morgan Stanley expects 200 basis points of tightening to 5.5% by the end of 2010. Bank of America Merrill Lynch meanwhile anticipates a long pause at February’s 3.5% level until the second quarter. However, even if rates do rise as expected, they will still be way below the 9.0% seen in January 2009. Anticipated more hawkish policy is expected to encourage issuers to place bonds as early in the year as possible, says Pablo Andrés Atuesta, a DCM banker with BBVA. This is a reversal from the trend seen in 2009, when companies waited in expectation of rate cuts, he adds. Colombia eased 500 basis points last year. Besides that, liquidity is very much available and ready to be deployed as issues in Colombia tend to be high grade, rated either AAA or AA+. “The local pension funds will have received about 5 trillion pesos in liquidity by mid-February and they are going to want to invest,” says Fredy Vivas, an o cer at state-owned development ﬁnance agency Findeter. > Data from Dealogic shows that in 2009 there were 41 bond issues worth 10.8 trillion pesos, up from 27 issues worth 5.5 trillion pesos in 2008. There were 29 issues worth 6.7 trillion pesos in 2007 and four issues worth 1.7 trillion pesos in 2006. Atuesta adds that issues ranged in size from a high of 750 billion pesos to a low of 13 billion pesos and that the spread over TES averaged around 80 basis points. As in 2009, analysts expect this year’s local tenors to be mostly in the 5-10-year area. Queue Forms As of mid-February, companies in sectors ranging from ﬁnance to publishing had unveiled plans to tap domestic markets and several were already placing local bonds. Findeter placed 300 billion pesos ($155 million) in credit deposit notes with a twoyear tranche paying DTF plus 1.08% and a ﬁve-year tranche paying IPC plus 3.92%, says Vivas, adding that total demand was 679 billion pesos. Proceeds from the AAA rated notes issue will be used to ﬁnance lending operations, says Vivas. He adds that the agency structured and managed the operation itself. Colinversiones CEO Juan Guillermo Londoño tells LatinFinance that the board of Epsa, in which the company recently purchased a 47% stake, has authorized it to issue up to 900 billion pesos ($453 million) in local bonds to ﬁnance the March/April 2010 LATINFINANCE 63

Latin Finance - March/April 2010

Table of Contents for the Digital Edition of Latin Finance - March/April 2010