Latin Finance - November/December 2010 - 6

Debt

Quasis on Deck

To the relief of dizzy investors and baggy-eyed bankers, LatAm issuers began to take a minor breather in October, slowing from September’s breakneck pace that saw $14.6 billion in cross-border dollar bonds. The total is up from September 2009’s total of $8.48 billion and easily tops a pre-crisis $2.64 A rash of perpetual reﬁnancings in September quickly turned billion in September 2007. The region had done $73.8 billion in into too much of a good thing, with oversupply and pushy cross-border bonds this year through October 10, according to pricing leading to several issues Dealogic, exceeding 2009’s full-year trading down. Odebrecht kicked total of about $70.0 billion. Bankers DCM Rank by Volume, Year to October 11 o the lineup with an upsized $500 say it sets a new all-time record. JPMorgan tops ﬂow charts million non-call ﬁve at a 7.5% yield. Record inﬂows to dedicated asset Rank Bookrunner Value $m # Deals The deal, through Credit Suisse managers and all-time low interest 1 JPMorgan 9,380 31 and Itaú, had a $5 billion book, and rates are fuelling the bonanza, 2 HSBC 9,182 43 encouraged others with 9.0%-plus coupled with the fact that local and 3 Deutsche Bank 9,060 24 coupons to reﬁnance perpetuals loan markets remain constrained. issued in 2004-2006. Few analysts predict much change to 4 BofA Merrill 7,864 36 Brazilian steelmaker CSN sold $1 this outlook anytime soon, though 5 Credit Suisse 7,595 23 billion in perpetual NC5s at a tight conventional wisdom also says the 6 Citi 6,914 28 7.0% yield on about $8 billion in region’s corporates are not desperate 7 Santander 5,714 25 demand, through Bank of America for cash. Bankers and analysts expect 8 Goldman Sachs 4,649 11 Merrill Lynch (BAML), Credit deal ﬂow to continue, though not at 9 Banco Itaú 3,378 20 Suisse, Deutsche Bank and Morgan September’s pace, even if the focus is 10 Banco do Brasil 2,520 15 Stanley. The bond performed poorly now more on opportunistic taps. afterwards in the secondary, as did Subtotal 66,257 131 “We’re going to be with this high a well-bid $450 million perpetual level of issuance for a while,” says a Total 84,134 153 NC5 from Braskem, via Deutsche, hopeful New York-based DCM banker. Source: Dealogic HSBC and Itaú. The only one to The market awaits several statetrade decently in the week after issue backed issuers likely come in the DCM Rank by Fees, Year to October 11 seemed to be a $750 million 6.625% remainder of the year. Chilean miner CS closing in on JPM perp from Pemex, managed by Citi Codelco seeks up to $1 billion in and HSBC. 10-year bonds. Investors hope a big Rank Bookrunner Revenue $m % Share Brazil’s Votorantim pulled a $500 size could mean a larger new issue 1 JPMorgan 30 12.30 million perp when it could not get premium to its 2019 bonds, which 2 Credit Suisse 27 11.20 pricing at 7.0% or below. BAML, traded about 70 basis points back of 3 BofA Merrill 27 11.00 HSBC, Itaú and Morgan Stanley the sovereign in early October. 4 Deutsche Bank 26 10.80 were managing the Ba3 deal, the Elsewhere, Peruvian development 5 HSBC 18 7.50 ﬁrst announced this year that was bank Coﬁde has been preparing a Subtotal 128 52.70 not a reﬁnancing of an existing perp. $200-$300 million 10-year transaction Total 243 100.00 Debutant BR Properties was able to for a few months. In Brazil, São Paulo raise $200 million, by paying a 9.0% Source: Dealogic state water utility Sabesp is looking yield. Credit Suisse and Itaú managed for $500 million, likely in the 10-year the B+/Ba3 bond. space, through Itaú and Santander. Mexico locked in historically low interest rates with the ﬁrst On the corporate side, the market awaited a $150-$300 100-year bond from a LatAm sovereign. The 90-100 basis point million reﬁnancing from Edenor, continuing to show the premium versus its 30-year, while in line with the spread for selective access available for Argentine corporates, following other so-called century bonds this year left many scratching their issuance from the likes of Pan American Energy and Irsa. Candy heads. The $1 billion size on $2.6 billion demand turned heads maker Arcor is meanwhile heard seeking a $200-$250 million expecting a much smaller issue, as did the book which the issuer bond, likely at seven years. claims is a typical UMS investor base. In mid-October, Brazilian commodity trader and originator “We are at historic lows, and could potentially not see such Ceagro Agrícola was looking to raise a debut 2016 bond. Though low yields across the globe for a long time. You have to look the size is small at $100 million, it could become the ﬁrst in a at it from that perspective, even through they paid a bit of a line of non-sugar and ethanol agriculture plays from Brazil. The market was not open for anything in September, though, premium,” says Paul Biszko, EM strategist at RBC. The 5.750% of 2110 priced to yield 6.1%. LF with Mexico’s Fertinal still struggling to close a $200 million

bond in early October. The fertilizer maker was reworking covenants and had raised the yield to a 13% handle from 12% in order to get investors back to the table. Chile’s BCI bank pulled a 2015 dollar deal, believing it could get a better deal than UST plus 275 basis points in the deep domestic bond market.

Perpetual Pushback

6 LATINFINANCE

November/December 2010

Latin Finance - November/December 2010

Table of Contents for the Digital Edition of Latin Finance - November/December 2010