Category: Bonds

Brazil is heard mulling a tap of the 2037s in a deal that DCM specialists say makes sense. “The market is there, they could do whatever they want,” says a New York based banker, who adds that supply at the 2015 and 2019 points may also make sense. A senior banker at another shop says the sovereign could easily raise $500m-$1bn this week. “The market has got plenty of demand,” he adds. The 7.125% coupon issue was bid at 110.8 Monday, up marginally over 7 days earlier, according to UBS Pactual and Barclays. The latter says it is trading rich to fair value. Another sovereign rumored to be considering a tap is Colombia, though it is apparently less advanced in the process than Brazil. Nonetheless, despite the onset of summer and likely disappearance of some investors, this week looks set to see more debt supply. Corporates in the pipeline include Cosan, Alestra, Javer and Petrotrin. Issuers are “These issuers should go to market to take advantage,” says a DCM official. The buyside has hurled almost $30bn in orders at the $5.75bn issued cross border so far in July by LatAm names, a twelvefold leap from the $470m flow witnessed in July 2008. Bankers not on those issues claim they were done too cheap.

Joining the Mexican junk corporate DCM pipeline, Servicios Corporativos Javer is lining up a $160m-$200m 5-year through BofA-Merrill and Credit Suisse. Moody’s rates the deal Ba3 (stable) on a global scale. Proceeds will repay around $39m holding company debt (Proyectos del Noreste) via dividend payment and be for general corporate purposes, says Fitch, which assigns a BB minus rating and assumes 51%-70% recovery in the event of default. Javer will hedge interest and a portion of the principal against foreign exchange risk, says Moody’s, which notes that 100% of the issuer’s corporate debt will be in USD, while Javer generates cash in MXP. Moody’s says Javer’s leverage and capital structure remain solid for its rating category. As of March 31, the cash to short-term debt ratio was 1.61x, however upon completion of the unsecured bond issuance the company is expected to push short term maturities to 2014. Javer is one of the largest privately-owned homebuilders in Mexico in terms of housing units sold and has a leading presence in northeastern Mexico, particularly in Nuevo Leon with approximately 21% market share in the construction of all houses for which Infonavit provides loans, says Moody’s. The agency notes risks in the form of revenue concentration in the State of Nuevo Leon, as well as reliance on the Mexican economic and political environment. “The high costs of land and land development present further challenges for Javer,” adds the agency. The company specializes in construction and commercialization of affordable entry-level, middle income, and residential housing units in Mexico.

A July 23 Daily Brief entitled “Banco de Chile Sells $193m Local Bonds,” misstates the borrower. The correct issuer is Chilean credit union Coopeuch.

A string of bond deals – and more to come – pushes JPMorgan close to the top of the regional DCM league table for the first time in years. The US shop is on a roll year to date, with $3.71bn in proceeds from 10 deals, or 10.47% market share, Dealogic data shows. HSBC is still first, with $3.77bn from 20 transactions (10.63%), but JPMorgan has made the jump from third place on June 26 – when it had little over $2bn – and looks set to topple the UK bank. It is fresh from joint leading a blowout $1.5bn trade for Ecopetrol, as well as a Peru tap, and has another $600m or so in proceeds on the way from Arauco and EPM. “JPMorgan is benefitting from good write-ups in the international press,” says a New York DCM banker at a competing shop. “They are benefitting from being in a strong position when other banks are weak,” he adds. The banker also notes that JPMorgan is not using balance sheet to the same extent as HSBC. A year ago, JPMorgan was lagging at number 9 for 2008 through July 20, with just $1.42bn, or 3.58% share. It has not been in the top bracket for debt since 2006, and after a late 2008 cull of DCM talent, some competitors wondered whether JPMorgan was finished in LatAm bonds. LatAm DCM volume has shrunk 10.7% year-on-year, to $35.4bn so far and the top 10 includes most of the same names. Glaring omissions from the top 10 include Deutsche, which was number 1 this time last year, with close to $4bn in proceeds, and Itau, which was number 8. Other DCM houses in decline are Barclays, at number 6 versus 2 last year, and Credit Suisse, which has tumbled to 9 from 3. New entrants in the top 10 versus a year ago are Goldman Sachs ($1.50bn, 4.23%) and BofA-Merrill ($1.44bn, 4.06%). Dealogic’s DCM data include local currency transactions.

Colombia’s Empresas Publicas Medellin has opted to follow compatriot Ecopetrol into the DCM market and fit in a jumbo offering before the summer hiatus. The utility was set to begin investor meetings in New York today, visiting the US west coast by the end of the week, London Monday, and finishing in Boston on Tuesday. A 10-year $500m plus offer is expected. Proceeds are expected to fund future acquisitions, as the BB+ rated utility looks to expand in Colombia and throughout the Latin America. JPMorgan and Bank of America-Merrill Lynch are managing the sale.

Colombia’s Ecopetrol, preparing a dollar bond to likely come in the second half of this year, is rumored to have selected JPMorgan and Barclays as managers on the deal, according to Colombia-based DCM sources. Officials at the state-owned oil producer and its presumed leads decline to comment. Ecopetrol, which has no financial debt, has been looking to boost the efficiency of its balance sheet through dollar bonds, peso notes and loans. Shareholders have approved a $4.1bn shelf for combined bond issuance in international and local markets. A $500m plus 10-year USD deal and local transaction of up to COP3trn in size, with multiple tenors, are expected. In May Ecopetrol raised COP2.2trn ($994m) via a 7-year loan from a group of local banks, priced at 400bp over DTF.