LatinFinance - November/December 2016 - 8

NEWS
BONDS

Debt capital markets are expected to maintain pace for another few
weeks, but may shut up shop for the year early. By Peter Agra

Wrapping up
Solid market conditions
encouraged a range of
borrowers into the bond
market in September and
early October, and more are
expected to take advantage
before year-end. Some
anticipate the market will
shut down as soon as early
December as investors look to
book a strong year of gains and
avoid further risks.
Concerns about the US
Federal Reserve's next move
and the US Presidential election
continue to spark volatility,
and that has taken its toll on
some borrowers. Brazil's Ouro
Verde, rated BB- by Fitch,
stepped back from the market
in September after targeting a
$300 million 2021 cross-border
debut. It is understood to be
seeking the cash in the local
market instead.
Mexican borrowers have
had more success. The trend
is likely to continue with
many firms needing to fund
infrastructure and other
projects for 2017.
A green bond from Mexico
City Airport Trust garnered
particular interest. The
borrower issued $2 billion in
2026 and 2046 notes, making
it the largest green bond from
a Latin American issuer yet.
The combined order book
was heard to be as much as $14
billion, underscoring the depth
of demand for high-grade Latin
paper.
State-owned Pemex also
tapped the market in size,

issuing $4 billion in September,
split evenly between 2023 and
2047 tenors. It paid a modest
concession, which observers
attributed to low oil prices and
the firm's high leverage. The
new 2023 note was priced to
yield 4.625%, some 32 basis
points above where its existing
2023 bond was trading. Its
new 2047 was priced to yield
6.75% compared, 65 basis
points cheap to where its 2044
changed hands.
Mexican lender Banorte
showed that investors still
have appetite for riskier paper
from the region too. The bank
issued a $500 million Basel III
compliant tier two security.
Investors could lose some of
the principal value if Banorte's
capital ratio falls below 4.5% of
risk weighted assets. The subinvestment grade instrument
also features deferrable,
cumulative coupons.
Sovereigns and quasisovereigns are likely to fill the
pipeline for the rest of the year
with activity in the markets
expected to spike in November
but become quieter by
December. In particular, more
sovereigns may tap the market
to pre-fund for 2017
In September, Argentina
returned to the cross-border
bond market for its third
benchmark-sized crossborder bond issue this year.
The sovereign had already
borrowed $19.25 billion in new
bonds this year. This time the
sovereign opted for the euro

8 L ATINFINA NCE.COM - November/December 2016

DCM rank by volume, year to October 11
BAML inches up
Rank
1
2
3
4
5
6
7
8
9
10

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

Value ($m)
15,986
13,152
13,085
12,219
12,206
10,761
6,548
5,961
4,749
4,422

# Deals
46
36
32
41
41
33
22
16
22
17

130,055

239

Source: Dealogic

market, raising €2.5 billion
($2.8 billion) in 2022 and 2027
notes, although some investors
grumbled about the thin
concession on offer.
El Salvador continues to be
a potential issuer this month as
the country needs to issue up
to $1.2 billion in cross-border
bonds to meet its commitments
for the current fiscal year.
President Salvador Sánchez
Ceren said his administration
is seeking to pass a new fiscal

For daily updates on
the bond market, visit:
latinfinance.com

responsibility law which he
hopes will convince congress to
approve an international bond
sale.
On the mind of both issuers
and investors continues to be
the outcome of the US elections
on November 8 and its impact
on market conditions. Issuers
from Mexico are expected to be
active but the outcome of the
US elections could impact the
Mexican peso making issuers
rethink their options. LF

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Table of Contents for the Digital Edition of LatinFinance - November/December 2016
