LatinFinance - March/April 2015 - 6

NEWS
BONDS

Sovereigns have tapped international markets with tightly-priced
deals, but volatility and the Petrobras corruption scandal pushed
Brazilian issuers to the sidelines. By Eduardo García

Sluggish start
After years of record issuance,
bond sales this January seemed
markedly muted. The United
Mexican States took the
lead when it raised $2 billion
through the reopening of a
2025 and the sale of a new 2046
bond on January 12.
Sources had widely
predicted that Mexico would
be the first in the line saying its
popularity among emerging
market investors would
guarantee a safe passage
through the volatility rocking
the market.
The sovereign took around
$7.5 billion in orders from 270
accounts, a solid book that
allowed lead managers Bank of
America-Merrill Lynch, Credit
Suisse and Morgan Stanley
to add $500 million to the
sovereign's 3.6% $2bn 2025
global bond and to sell a $1.5
billion 2046 in deals that came
below initial price thoughts.
The new issue was
combined with a switch tender
through which the holders of
around $2 billion worth of eight
old bonds switched to the 2025
and 2046, which now have a
face value of $3 billion each.
Pemex was next in the line,
raising $6 billion through a
triple-tranche deal that was
four times subscribed. The
Mexican oil company sold
a 3.50% $1.5 billion 2020
tranche, a 4.50% $1.5 billion
2026 and a 5.625% $3 billion
2046.
The Dominican Republic
tapped investors for $2.5

billion in late January, in a deal
that benefited from pent up
demand and expectations that
the country will benefit from
low oil prices. The B1/B+/B+
rated Caribbean nation priced
a $1 billion 2025 bond to yield
5.5%, and a $1.5 billion 2045 at
6.85%. Bank of America Merrill
Lynch and JPMorgan led the
deal, while Banreservas was
co-manager.
"It was very tight," said one
observer. "I was not expecting
to see a sovereign so far down
the credit spectrum pricing
something so tight, but they
did."
Colombia priced a 5%
$1.5bn 2045 bond taking $5bn
in orders from investors eager
to buy long-term paper from
the fast-growing nation, despite
fears over the effects of falling
oil prices.
The period was marked by
the total lack of activity from
Brazilian issuers, who have sat
on the sidelines as volatility
and uncertainty boils on amid
investigations into corruption
allegations at Petrobras and its
suppliers. Meanwhile, credits
exposed to low oil prices
were pushed to the sidelines,
which set a good backdrop for
Andean issuers to shine.
Chile's BancoEstado raised
JPY31 billion ($263 million) in
late January with a bond sale
that dodged volatile conditions
in the dollar market.
Peru's Intercorp sold a
5.875% 2025 $250 million
bond that was seven-times

6 L ATINFINA NCE.COM - March/April 2015

DCM rank by volume, year to February 23
US banks on top
Rank
1
2
3
4
5
6
7
8
9
10
10
10

Bookrunner
Morgan Stanley
BofA-Merrill
JPMorgan
HSBC
Citi
Credit Suisse
BBVA
Scotiabank
Daiwa Securities
Deutsche Bank
Credit Agricole
Barclays
Total

Value ($m)
3,672
2,853
2,325
2,261
2,018
1,676
1,595
600
382
250
250
250

No. Deals
4
4
4
4
5
3
2
2
2
1
1
1

18,301

13

Source: Dealogic

subscribed. The financial
institution used the cash to buy
back 95.3% of its 8.625% $250m
2019 in a transaction managed
by Citi and Credit Suisse.
Chilean retailer Cencosud
raised $1 billion in a deal
that included a rare 30-year
tranche. Books were heard to
be three times subscribed, in
part because investors were
eager to get their hands on
yield from an investment-grade
issuer given historically low
yields in the US and Europe.
Two issuers from Argentina
weathered the rocky market
conditions to issue bonds. YPF
raised $500 million through a
tap of its 2018 and 2024 notes
in a deal managed by Citi, Itaú
and JPMorgan. The City of
Buenos Aires followed suit,
raising $1.7 billion of demand
for a 8.95% $500 million 2021

bond in early February.
The slump in oil and
commodity prices, uncertainty
about the Eurozone, low global
growth and the Petrobras
corruption scandal drove up
volatility and caused many
borrowers to wait for better
conditions to issue. The
landscape is unlikely to become
much easier for those wanting
to raise capital as investors study
signs of economic growth in
the US and the possibility of an
interest rate rise there, Mexico's
head of Public Credit Alejandro
Díaz de León told LatinFinance:
"This means that choosing
the right window of opportunity
will be
complex
... they will
appear and For daily updates on
disappear." the bond market, visit:
latinfinance.com
LF
http://www.latinfinance.com http://www.LATINFINANCE.COM
LatinFinance - March/April 2015

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