Category: Bonds

Panama’s Global Bank plans to revisit pricing efforts for what would be Latin America’s first covered bond as soon as this quarter, senior vp of finance Jorge Vallarino tells LatinFinance. “We are confident we will price this transaction this year and at a level that works for us,” the official says. Market conditions and a pricing disconnect for the novel structure were disclosed as reasons for a postponement at the beginning of the month. Vallarino explains that since then new investors have knocked on Global Bank’s doors, specifically global EM accounts with exposure to and appetite for structured paper. The bank was preparing a $200m 5-year bond at a 5.00-5.25% yield, but a new deal could see a larger size, he adds. A sale could come as soon as this quarter, if market conditions allow. The transaction would be led by Deutsche Bank and HSBC. Though many international accounts might have difficulty with covered bonds and other structured deals coming out of the region, many see covered bonds as a useful instrument for the right issuers in the right juridisdictions. “There is recognition by the market that these are solid instruments, and as covered bonds have a sovereign risk element to them and with Euro credit ratings going down and Latin American credit ratings going up, the market for covered bonds in Latin America is a possibility,” says Michael Morcom, head of Latin America agency and trust sales at Citi. “The biggest challenges are bringing US investors on board, and [that the issuer] does need size for funding purposes. This time next year we should see more covered bonds and the next covered bond will have to come from Latin America,” says Magchiel Groot, senior investment office at Dutch Development Bank FMO. Backed by a cover pool of residential mortgages denominated in USD and located in Panama, Global Bank’s covered bond deal had a Baa3/BBB minus rating, above Global Bank’s Ba1/BB+ default rating. The mark reflects a first recourse to Global Bank a