LatinFinance - May/June 2015 - 8

NEWS
BONDS

Investors remain keen for Latin American debt and Petrobras'
financial results could pave the way for Brazilians to get back into
the market. By Patrick Ferguson

Returning to form
A lack of new international
bond sales from Latin America
has propelled demand for the
few issuers that do come to
market. Those transactions
have been metaphorically
mobbed by investors, with
order books heard to be
subscribed by three or four
times.
"The new issue market is
in demand right now because
there really hasn't been a lot
out there," an investor told
LatinFinance.
The absence of Brazilian
borrowers has been behind
much of the slow market. The
country typically accounts for
a sizeable share of new bond
sales out of Latin America. But
as uncertainty lingers over the
ultimate limits of corruption
investigations in Brazil,
investors have been wary of
buying paper from the country.
Petrobras, at the center of
the investigations, released
much-delayed audited financial
results for the third and
fourth quarters of 2014 in late
April. The clarity provided in
those documents, as well as
expectations of low US interest
rates to persist, could open
doors for corporates wishing to
tap the market.
Indeed, in the days after
Brazil's state-owned oil
company published its
financial statements, YPF
and Empresa Eléctrica
Guacolda tapped the market,
pulling in heavy books. The
Argentine oil company sold an

8 L ATINFINA NCE.COM - May/June 2015

8.5% $1.5 billion 2025 bond.
The company priced the note
below guidance of 8.75% and
tripled the $500 million the
company initially sought,
although that amount had
already been subscribed on a
reverse inquiry basis.
Chile's Guacolda sold a
4.56% $500 million 2025
bond, and was heard to have
drawn an order book of some
$3 billion. That underscored
just how hungry investors are
for Latin American corporate
paper, an investor said.
Others looked set to follow:
development bank Bladex,
Colombian oil company
Pacific Rubiales and Mexico's
JB y Compañía, which owns
tequila maker José Cuervo,
were on the road for possible
issues.

Sovereign lead

Brazilian borrowers might even
be next. After Petrobras' results
were released, investors said
they expected the sovereign
to tap the market, a move
that would open cross-border
opportunities for Brazilian
corporates.
Sovereigns elsewhere in
the region have received a
warm welcome. The United
Mexican States glittered
once again in the bond market
when it turned to European
investors to launch its third
100-year bond. The €1.5 billion
($1.6 billion) deal yielded 4.2%
and was 4.2 times subscribed,
snatching demand from an

DCM rank by volume, year to April 30
Santander strides ahead
Rank
1
2
3
4
5
6
7
8
9
10

Bookrunner
Santander
BofA Merrill Lynch
Morgan Stanley
HSBC
Citi
Deutsche Bank
BBVA
Credit Suisse
JPMorgan
Barclays
Total

Value ($m)
6,711
6,007
5,756
5,513
4,529
4,528
4,073
3,455
2,986
2,055

No. Deals
14
16
11
21
27
12
19
11
9
5

54,690

82

Source: Dealogic

investor base resigned to
ultra-low local yields for years
to come.
Argentina, which failed
to sell a dollar-denominated
bond in February and is still
battling with holdout bond
owners, tapped its local market
with dollar sale. The sovereign
added $1.4 billion to its 8.575%
2024 bond, far more than the
$500 million originally sought.
NML Capital, the holdout
creditor leading litigation
against Argentina in the courts,
was unimpressed, saying
it would closely scrutinize
potential action.
Paraguay reopened its
4.625% 2023 bond in late April
to add $280 million. The sale
was priced to yield 4.15%,
tighter than initial thoughts of

4.25% area.
Meanwhile, investors have
pushed back predictions on
when the US Federal Reserve
might raise interest rates, which
have been near-zero since 2008,
on the back of weaker economic
data. The US added 126,000
jobs in March, a 15-month low,
and analysts forecast the US
economy to post 1% annualized
growth in the first quarter.
With low interest rates
hanging around longer in the US,
Latin American issuers might
have a little more time to offer
tantalizing yields to northern
investors
while still
locking
in decent
For daily updates on
the bond market, visit:
funding
latinfinance.com
costs. LF
http://www.latinfinance.com http://www.LATINFINANCE.COM
LatinFinance - May/June 2015

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