Latin Finance - September/October 2009 - 2

Front Notes Buy Now Pain Later arkets have tip-toed back from the brink of Armageddon, valuations are revving up and junk-rated borrowers have swooped in to feed investors eager for a hit. Brazil has emerged with a new sense of importance as the proxy for LatAm, riding high as if the last 18 months were all a bad dream. The buyside hurled more than $37.0 billion in orders at the $6.5 billion July cross-border LatAm bond bender, which was a huge step up from the typical summer dribble. For issuers, the binge makes perfect sense, as investors of all stripes whip out ample checkbooks for almost any LatAm name. And it is almost too good to be true for Wall Street’s dusty DCM teams. Many rediscovered their purpose, while also leaving substantial cash on the table to ensure they did not have to work too hard to move product. Lack of recent comparables and lingering disorder make it easy to cover up poor execution with the excuse that getting a deal done is enough to proclaim it a success. But investors – who lost most of the last five years’ strong gains in the meltdown – seem to have checked out of crisis-imposed rehab nursing an even stronger addiction. Their continued lack of restraint augurs ill for the region’s longer term revival. Colombian state-controlled oil producer Ecopetrol’s debut $1.5 billion 7.625% coupon 2019 drew one of the largest books of the year, at nearly $9 billion. Empresas Públicas de Medellín paid the same coupon on a $500 million 2019 offer that drummed up $6.5 billion in orders. Both cheap Colombians were trading around five points higher by mid-August. The roach in the ice cream was a $180 million five-year from Mexican homebuilder Javer, which spooked the handful of investors who still remember being burned by comparables like Desmet. The first true LatAm high-yield corporate of the bond market reanimation paid 13%, the juiciest coupon in years from a regional name. However, the Ba3/BB- issue failed to generate significant interest, hinting that the buyside might have regained its senses. Lukewarm purchasing of subsequent deals from the likes of Petrotemex reinforced hopes that they had indeed sobered up. But Alestra’s $200 million in 11.75% of 2014 was well-bid, perhaps because the single B issuer paid for the privilege. And BB- Cosan got almost $2 billion in orders for an upsized $350 million helping of 2014 paper, on which yield was significantly tightened. There is more opportunistic junk bond issuance on the way for the rest of the year. Bankers are eager for every chance to get this kind of trade done, not least for the beefy US high yield-style fee. Sovereign paper is getting more expensive as cash continues to flow into LatAm, especially Brazil, which proved that there is a bid for duration with a textbook tap of its 2037 bond. And money is clearly flowing back into the emerging markets. But closing your eyes, gritting your teeth and hoping for the best is no investment strategy. And corporate credit quality is not rising. The default rate for LatAm corporates covered by Fitch is seen jumping to approximately 9.0% this year, versus 3.2% during 2008, with a worst case scenario being 13%. Liquidity and cashflow positions have deteriorated dramatically among lower speculativegrade rated corporate issuers, owing to the steep global slowdown. Cemex, which started the last bull run top of most high grade investors’ shopping list, has just emerged from a humiliating and costly restructuring of almost $15 billion. Bertin, Durango, Gol, Independência, Su Casita and IUSA are just some of the duds strewing the wreckage from the last spurt of irrational exuberance. Besides continued buffeting from the developed world, fundamentally, the LatAm bull run has dwindled to just Chile and Brazil, as trouble spreads through the Andes. Chile is too small and Brazil is likely a top pick of your grandmother, so there is limited space to operate. Upcoming region-wide elections, creeping inflation and stalled reforms are part of the laundry list of problems that keep being swept under the rug every time buyside cravings resurface. As collective relief that markets are still alive turns to euphoria, investors are keen not to be left behind with excess cash. There are clearly some bargains to be had, particularly as the main economies resume the long term growth story that began pre-crisis. But just as US consumers found during this decade’s debt-fuelled consumption orgy, purchasing cheap now can mean paying very dearly later. LF Have your say at www.latinfinance.com 2 LATINFINANCE September/October 2009 EDITOR James Crombie ASSISTANT EDITOR Dan Shirai REPORTERS Ben Miller, Taina Rosa CONTRIBUTORS Lucien Chauvin, Jonathan Roeder, John Rumsey ART DIRECTOR Rosa Matamoros-Sense COVER ILLUSTRATION Dean MacAdam COMMERCIAL DIRECTOR James Norton DIRECTOR OF BUSINESS DEVELOPMENT Teresa Aguilar MANAGER, CARIBBEAN, PERU, BOLIVIA, ECUADOR Arielle Schrader MANAGER, MEXICO & LEGAL SERVICES Mark Hudson CARIBBEAN & VENEZUELA REPRESENTATIVE Matthew Perks T +1 718 260-8970 SENIOR EVENTS MANAGER Omar Suarez EDITORIAL DIRECTOR, CONFERENCES & SPECIAL PROJECTS Michael Brosgart EVENTS PROGRAMMER Alana Gutiérrez EVENTS MARKETING MANAGER Alex Rubin GROUP MARKETING MANAGER Louis Cassetta CIRCULATION MARKETING MANAGER Patricia Arcic OFFICE MANAGER Teresa Romero ASSISTANT TO THE CEO Vicky Maqueira NETWORK ADMINISTRATOR Lukasz Przybyl LATINFINANCE BOARD OF DIRECTORS PRESIDENT Christopher Garnett DIRECTORS Stuart Allen, James Crombie, Colin Jones, Giuliana Moreyra CHIEF EXECUTIVE OFFICER & PUBLISHER Stuart Allen CHIEF OPERATING OFFICER Giuliana Moreyra M Telephone: +1 305 448-6593 Fax: +1 305 448-0718 E-mail: editorial@latinfinance.com www.latinfinance.com Subscriptions hotline: U.S. +1 800 437-9997 +1 212 224-3570 U.K. +44 (0) 870 906-2600 E-mail address: subscriptions@latinfinance.com Subscriptions: one year magazine only $495. Premium subscriptions $2,499 Send subscription orders to: LatinFinance, 2600 Douglas Road, Suite 410, Coral Gables, FL 33134 USA T 305-448-6593, F 305-448-0718. Copyright© 2009 Latin American Financial Publications, Inc. is owned by Ell Holdings, Inc. All rights reserved. Reproduction in whole or in part of any text, photograph, or illustration without written permission from the publisher is strictly prohibited. Title is protected through a trademark registration with the US Patent Office. Indexed in Information Access Company.
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Latin Finance - September/October 2009

Table of Contents for the Digital Edition of Latin Finance - September/October 2009

Latin Finance - September/October 2009
Contents
Investment Banking Survey
Who Said That?
OTPP Investment Strategy
Central Bank Scorecards
Brazil Liability Management
Real Estate Equity Resurrected
Structured Finance Forecasts
Grim Outlook. Reform Required
Banorte Seeks to Grow
Peru Spending Hits a Block
BCP Sees Better Days
Caribbean Investment Report
Sustainable Banking
Legal Services Survey
Parting Shot
Latin Finance - September/October 2009 - Latin Finance - September/October 2009
Latin Finance - September/October 2009 - Cover2
Latin Finance - September/October 2009 - Contents
Latin Finance - September/October 2009 - 2
Latin Finance - September/October 2009 - 3
Latin Finance - September/October 2009 - 4
Latin Finance - September/October 2009 - 5
Latin Finance - September/October 2009 - 6
Latin Finance - September/October 2009 - 7
Latin Finance - September/October 2009 - 8
Latin Finance - September/October 2009 - 9
Latin Finance - September/October 2009 - 10
Latin Finance - September/October 2009 - 11
Latin Finance - September/October 2009 - 12
Latin Finance - September/October 2009 - 13
Latin Finance - September/October 2009 - Investment Banking Survey
Latin Finance - September/October 2009 - Who Said That?
Latin Finance - September/October 2009 - 16
Latin Finance - September/October 2009 - 17
Latin Finance - September/October 2009 - 18
Latin Finance - September/October 2009 - 19
Latin Finance - September/October 2009 - 20
Latin Finance - September/October 2009 - 21
Latin Finance - September/October 2009 - 22
Latin Finance - September/October 2009 - OTPP Investment Strategy
Latin Finance - September/October 2009 - 24
Latin Finance - September/October 2009 - 25
Latin Finance - September/October 2009 - Central Bank Scorecards
Latin Finance - September/October 2009 - 27
Latin Finance - September/October 2009 - 28
Latin Finance - September/October 2009 - Brazil Liability Management
Latin Finance - September/October 2009 - Real Estate Equity Resurrected
Latin Finance - September/October 2009 - 31
Latin Finance - September/October 2009 - 32
Latin Finance - September/October 2009 - 33
Latin Finance - September/October 2009 - 34
Latin Finance - September/October 2009 - 35
Latin Finance - September/October 2009 - 36
Latin Finance - September/October 2009 - Structured Finance Forecasts
Latin Finance - September/October 2009 - 38
Latin Finance - September/October 2009 - Grim Outlook. Reform Required
Latin Finance - September/October 2009 - 40
Latin Finance - September/October 2009 - 41
Latin Finance - September/October 2009 - 42
Latin Finance - September/October 2009 - 43
Latin Finance - September/October 2009 - 44
Latin Finance - September/October 2009 - Banorte Seeks to Grow
Latin Finance - September/October 2009 - Peru Spending Hits a Block
Latin Finance - September/October 2009 - 47
Latin Finance - September/October 2009 - 48
Latin Finance - September/October 2009 - 49
Latin Finance - September/October 2009 - BCP Sees Better Days
Latin Finance - September/October 2009 - 51
Latin Finance - September/October 2009 - 52
Latin Finance - September/October 2009 - 53
Latin Finance - September/October 2009 - 54
Latin Finance - September/October 2009 - Caribbean Investment Report
Latin Finance - September/October 2009 - 56
Latin Finance - September/October 2009 - 57
Latin Finance - September/October 2009 - 58
Latin Finance - September/October 2009 - 59
Latin Finance - September/October 2009 - 60
Latin Finance - September/October 2009 - 61
Latin Finance - September/October 2009 - 62
Latin Finance - September/October 2009 - 63
Latin Finance - September/October 2009 - 64
Latin Finance - September/October 2009 - 65
Latin Finance - September/October 2009 - 66
Latin Finance - September/October 2009 - Sustainable Banking
Latin Finance - September/October 2009 - 68
Latin Finance - September/October 2009 - Legal Services Survey
Latin Finance - September/October 2009 - 70
Latin Finance - September/October 2009 - 71
Latin Finance - September/October 2009 - 72
Latin Finance - September/October 2009 - 73
Latin Finance - September/October 2009 - 74
Latin Finance - September/October 2009 - 75
Latin Finance - September/October 2009 - 76
Latin Finance - September/October 2009 - 77
Latin Finance - September/October 2009 - 78
Latin Finance - September/October 2009 - Parting Shot
Latin Finance - September/October 2009 - 80
Latin Finance - September/October 2009 - Cover3
Latin Finance - September/October 2009 - Cover4
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