LatinFinance - March/April 2014 - 8

NEWS
BONDS

Enthusiasm in the bond market is waning as borrowers and
investors adjust to changing funding rates. By Eduardo García

Proceed with caution
Latin American bond markets
had a bumpy start to the year.
Things started promisingly
when Petrobras issued bonds
denominated in euros and
sterling worth around $5 billion
in total. Mexico followed soon
after with the year's first Latin
American sovereign Eurobond,
and the region's first dollar
sale, a $4 billion dual-tranche
transaction that it combined
with a liability management
exercise.
From there, a handful
of borrowers issued debt
internationally, including the
Bahamas, Mexico's CocaCola Femsa, and energy and
mining firms like Mexico's
Oro Negro, Brazil's Vale and
Peru's Hochschild. A number
of issuers overlooked the
dollar market in favor of better
terms in Europe: Brazil's state
development bank BNDES
sold bonds in euros, while
multilateral lenders Cabei
and CAF, as well as several
commercial banks, tapped the
Swiss franc market.
Things took a turn for
the worse toward the end of
January as emerging markets
were hit by a slew of troubling
news. Argentina caught
markets off guard with a
devaluation of the peso; riots
broke out in the Ukraine and
Venezuela. On top of that,
data indicating that economic
growth was slowing in China
and the US economy was not
picking up speed as expected
helped to shift investor

sentiment away from emerging
markets.
Yields on both dollardenominated and local
currency paper widened and
investors pulled money out
of emerging market funds
at startling speed. By late
February, $11.05 billion had left
global EM funds, according to
fund flow data from Barclays.
The investment bank noted,
though, that the numbers
reflected the more skittish,
retail investors, rather than
institutional investors.
Central American retailer
Regal Forest Holding, known
as Unicomer, was caught in
the whirlwind in late January
and forced to postpone a
planned $300 million bond as
the markets turned hostile. The
company has operations in 18
countries.
Still, Guatemalan telecoms
firm Comcel and Peruvian
miner Minsur went ahead
with bond sales worth $800
million and $400 million
respectively before January
came to an end. Both issuances
were oversubscribed, which
showed that despite the jitters
there was demand for Latin
American debt - but that
buyers were becoming more
selective.
Investors and bankers
insisted that despite the dark
headlines Latin America was
still in a good position to attract
foreign capital but potential
issuers would need to make
more effort to differentiate

8 L ATINFINA NCE.COM - March/April 2014

DCM rank by volume, Jan-Feb 26, 2014
Globals lead
Rank

Bookrunner

Value $m

1
2
3
4
5
6
7
8
9
10

Credit Suisse
HSBC
Deutsche Bank
BofA Merrill
Goldman Sachs
JPMorgan
BNP Paribas
Citi
Bradesco BBI
Crédit Agricole CIB

3,494
3,112
2,797
2,732
2,062
1,661
1,431
1,076
925
829

4
6
8
6
4
6
5
6
3
2

25,068

Total

# Deals

26

Source: Dealogic

themselves before they tap the
market.
Indeed, differentiation
was the catchphrase during
LatinFinance's Emerging
Issuers & High Yield
Forum in New York in midFebruary. "We still think that
it could be a good opportunity
but the international market
is going to be more selective.
But if you're a company
with a good perspective and
the rating is good, you'll
have opportunities there,"

For daily updates on
the bond market, visit:
latinfinance.com

Tatiana Alegre, chief executive
of Peruvian energy firm
Termochilca, said during the
forum.
Bankers expect to see
more market activity toward
mid-March - indeed some
borrowers, including Brazil,
had held talks with bond
investors. But the pace of deals
is expected to be slower than in
the past year, as investors take
a more cautious approach and
borrowers come to terms with
rising funding costs. LF

For full details on sovereign and
corporate liability management
exercises, as well as daily updates on all
Latin American bond deals in global and
local markets, see latinfinance.com.
http://www.latinfinance.com http://www.latinfinance.com http://www.LATINFINANCE.COM
LatinFinance - March/April 2014

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