LatinFinance - January/February 2014 - 6

NEWS
BONDS

Borrowers and bond investors are bracing for the impact this
year of rising rates, but markets are set to stay busy.
By Mariana Santibáñez

Braced for higher yields
the US federal Reserve's
December decision to begin
winding down its $85 billion
monthly quantitative easing
program is likely to translate
into higher interest rates for
latin american borrowers
this year. that could make
it tougher for lower-rated
companies and countries to tap
the market - although some
demand is expected to remain
for their higher yields.
investment bank Barclays
forecasts a busy year for
bond issuance, estimating
latin american corporates
will sell around $110 billion
worth of bonds in the dollar
market alone. in 2013, latin
americans - corporates and
sovereigns - raised $160
billion from cross-border bond
sales in the year to December
16, according to Dealogic. that
was a marginal increase on
2012. 
Better-rated credits
dominated the market in the
fourth quarter: issuers were
mostly investment grade
borrowers and double-B
institutions, with just the
occasional single-B credit
selling a deal.
"the market will continue
to be a little cautious on most
higher-beta single-B names,"
says arthur Rubin, head of
latin american capital markets
at nomura. "We need to see
more conviction and stability
around how tapering impacts
emerging market debt before
investors will commit to less

liquid single-B names. Higher
quality double-B names should
continue to have better access
to the market as investors look
for a way to hedge portfolios
against a continue increased
in US treasury yields while
waiting to see the impact of
tapering."
nonetheless, a number of
risky credits came to market
in December, ahead of the
fed's decision to wind down its
bond buying program by $10
billion a month, to $75 billion.
Single-B sovereign Honduras
sold a $500 million deal, as did
similarly-rated argentinean oil
firm YPF.
also in mid-December,
Santander México further
demonstrated demand for
lower-rated instruments,
selling the region's first Basel
iii-compliant tier two bond. in
line with the global regulatory
framework for bank solvency,
interest payments on the
10-year non-call five bond can
be deferred if the bank's tier
one capital falls below 7% of
risk weighted assets, and the
principal written down if the
capital ratio breaches 4.5%.
Just $325 million of the Ba1/BB/
BB+ rated deal was publicly
sold, with the parent company
picking up the remaining threequarters of the deal.
Beyond dollars
as some borrowers hurried
into dollars, others turned
to other markets, both
internationally and closer to

6 l atinfina nce.com - January/February 2014

DCM rank by volume, Jan-Dec 20, 2013
Citi extends its lead

Rank

Bookrunner

1
2
3
4
5
6
7
8
9
10

Citi
HSBC
Deutsche Bank
Bofa merrill
JPMorgan
Itaú BBA
BBVA
Morgan Stanley
Santander
Credit Suisse
Total

Value $m

# Deals

19,833
16,429
13,886
13,013
12,403
8,691
8,172
8,161
7,900
7,596

121
90
54
55
52
73
88
24
85
38

163,676

454

Source: Dealogic

Investment banking fees revenue, Jan-Dec 20, 2013
Credit Suisse, Citi, maintain lead
Rank

Bank

1
2
3
4
5

Credit Suisse
Citi
Bofa merrill
Itaú BBA
JPMorgan
Total

Revenue $m

% Share

176
156
139
136
135

8.9
7.9
7.1
6.9
6.8

1,972

100.0

Source: Dealogic; Includes M&A, ECM, DCM and loans fee revenue

home. mexican real estate
fund fibra Uno raised 8.5
billion pesos ($654 million) in
its local market. fibras have
issued much equity this year,
but this was the first time one
tapped the debt market. the
triple-tranche bond was also
the mexican market's largest
corporate deal of the year.
others looked to europe and
Japan. Banco de Chile sold
a ¥11.1 billion ($111.6 million)
three-year bond yielding a
skinny 0.74%. meanwhile,

Pemex raised €1.3 billion
($1.75 billion) in november
with a seven-year bond that
yielded 3.229%. Banco do
Brasil continued with a push
to diversify its funding sources
with a debut in the Swiss
market. the triple-B lender
increased its deal by 75 million
francs, printing 275 million
francs ($303 million). the
5.5-year bond was judged to be
around 30 basis points tighter
than where the bank would
have sold a deal in dollars. LF
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