Cross-border bond sales from Latin
America increased in the first week of July, as issuers fed investor demand for emerging market debt. Issuers also scheduled more investor meetings before the summer slowdown in New York and Boston,
two investors told LatinFinance.
Meanwhile, the US
Federal Reserve is in a holding pattern before its July
policy meeting. Investors and debt capital markets bankers agree that the Fed will not raise rates at the end of the month, owing to uncertainty over US inflation and the impact of the Brexit referendum last month.
Emerging
market issuers are likely to push forward with their cross-border bond
plans, faced with the potential of more market volatility, DCM bankers said.
Investor
appetite for Argentine credits still appears robust with roadshows planned for
local lender Banco
Galicia and paper company Celulosa
Argentina. The province of Chubut
is on the road next week and the infrastructure firm Clisa
is set to issue notes in the primary market this month.
Expectations
for Argentina were high after the sovereign launched a $16.5bn
trade in April. The provinces came next, and the remaining investor
interest was then destined for corporate issuers. However, as the pipeline moves into the
second half of the year, some investors are worried that the country’s appetite for
debt is not sustainable.
Argentina
returned to the cross-border markets last month, selling $2.75bn in
12-year and 20-year notes. One New York-based investor said the debt sale could have a negative impact on Argentina’s credibility because the sovereign had said earlier this year that it did not plan to retap the bond market.
Three Latin American bond deals priced in the primary market on July 7.
Brazil’s
state-owned Petrobras
added $1.75bn to its 8.375% 2021s and $1.25bn to its 8.75% 2026s, notes that the
company initially issued in May. In
an effort to lower exposure to leveraged corporates, investors preferred to
buy Petrobras’ shorter-dated bonds, a buy-side source said. The latest trade allowed Petrobras to extend its default risk by five years, and the state-owned energy company now has
about $15bn in debt due by 2021.
Brazilian
paper company Suzano
also issued $500m in 5.75% 2026 bonds, capitalizing on positive gains in
the pulp and paper sector. While margins are low, the paper sector benefits
from dollar-denominated revenues, mitigating foreign exchange risks, investors said.
In
Chile, power company Transelec
sold a 3.875% $350m 2029 bond after bookrunners Citi, JPMorgan, Scotiabank
and Santander took about $3bn in orders.
Halfway
into the year, Latin American bond issues for 2016 have already exceeded last year’s
total values, according to Dealogic. Including the three latest deals, Latin American bond
deals reached $72bn for the year, surpassing the $69bn recorded in all of 2015.