LatinFinance - November/December 2014 - 6

NEWS
BONDS

Negative rating actions on Brazil and Costa Rica put a
dampener on a busy first half of September in the sovereign
market, after which focus turned elsewhere. By Andre Puglie

Corporate shift
Latin America's bond markets
picked up in September,
although the tone remained
volatile with global events
creating a rocky issuing
environment.
Sovereigns were particularly
busy in the first half of
September. Brazil took close
to $5 billion in orders for a $1
billion reopening of its 2025
bond. The $3.25 billion note,
which carries a 4.25% coupon,
priced to yield 3.88% at 147
basis points over US Treasuries.
Days after the issuance,
though, Moody's put its ratings
outlook for the sovereign on
negative watch, citing low
growth, investor worries and
fiscal challenges. If Brazil's
GDP growth continues to
hover around 1% to 2% and
governmental debt metrics
do not change, the agency will
consider a downgrade, it said.
El Salvador saw strong
demand for an $800 million
2026 bond, which ended up
tightening after guidance to
yield 6.375%. The country's
legislature has approved the
sale of $1.16 billion of bonds
in local and international
markets to refinance debt and
ease pressure on the treasury.
That effort may be hampered,
however, by a BB- Fitch rating,
on which the agency has a
negative outlook.
"The lowest coupon
in Panama's history," as
Finance Minister Dulcidio de
La Guardia put it, was cause
for celebration. The Central

American country sold a $1.25
billion 10-year bond at 150 basis
points over US Treasuries after
initial price thoughts had put it
as high as 175 basis points. The
note carries a 4% coupon.
Developments in Argentina
were historic - in a negative
way. Following its July 30
default, the country tried
to bypass US jurisdiction by
swapping New York law bonds
for local paper. On September
30, $161 million in payments
to restructured bondholders
were deposited in a local
trustee account, which earned
Argentina a contempt of court
ruling from Judge Thomas
Griesa.
The fuss didn't keep the
opposition-led City of Buenos
Aires from adding $111 million
to its 3.98% bond, which
matures in 2019. Bad news,
however, reached Venezuela:
Standard & Poor's downgraded
that country's sovereign rating
to B-, along with the rating of oil
firm PDVSA. In Moody's view,
meanwhile, Costa Rica is no
longer investment grade: the
Central American country lost
two notches to Baa1.

Mexico focus

As the Brazilian vote drew
closer, investors said the effect
was threefold: the overall
market slowed, and the focus
shifted from Brazil to Mexico
and from sovereigns to
corporates, respectively.
One winner here was
Mexican energy firm Pemex,

6 L ATINFINA NCE.COM - November/December 2014

DCM rank by volume, year to October 17, 2014
International flavors
Rank

Bookrunner

1
2
3
4
5
6
7
8
9
10

Citi
HSBC
BofA Merrill Lynch
JPMorgan
Deutsche Bank
Santander
Credit Suisse
BBVA
Banco do Brasil
Morgan Stanley
Total

Value $m

# Deals

17,931
15,437
13,068
12,350
10,744
8,417
7,753
7,104
6,262
6,094

88
88
55
46
44
56
28
53
28
31

154,103

283

Source: Dealogic

which on September 4
reopened three bonds to raise
28.2 billion pesos ($2.14 billion).
The state-owned oil company
added 5 billion pesos to its
4.5-year floating-rate note at 1
basis point over the TIIE; 18.2
billion peso to its 10-year note
at a 6.8% yield; and 968 million
udis ($383 million) to its 11-year
note at a 3.17% yield.
Less than a month later,
Pemex secured a guarantee
from US Export-Import Bank to
sell a $500 million bond. The
note came in at 35 basis points
over Libor and matures in April
2025. Days later, the oil firm still
saw high demand for a new, $1
billion bond maturing in 2025
and for a $1.5 billion tap to its
January 2044 paper.
Fellow Mexican corporates
took the hint: Cement maker
Cemex raised $1.6 billion with
a dual-tranche deal consisting
of a $1.1 billion senior secured

2025 bond and a €400 million
($517 million) senior secured
2022 note. Petrochemical
company Mexichem,
meanwhile, sold $750 million
worth of 30-year paper, which
carried 5.875% in interest.
Elsewhere in Latin America,
the number and value of
Colombian and Chilean deals
stood out, observers noted.
Utility Empresas Públicas de
Medellín sold a $500 millionequivalent bond, which carries
7.625% and matures in 2024.
Pacific Rubiales, a
Colombian-Canadian joint
venture, priced a $750 million
10 non-call five-year note
at 5.625%. Chile's
Corpbanca offered a
paper
of the same
amount,
to mature
For daily updates on
the bond market, visit:
in 2019, at
latinfinance.com
3.875%. LF
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LatinFinance - November/December 2014

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