Mexico’s Volkswagen Bank plans to raise up to MXP7bn ($516m) in the domestic bond market, according to a regulatory filing. The bank has the option of fixed or floating rate notes. Proceeds are marked for funding operations. HSBC and Santander are managing.
Category: Bonds
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Transelec Gets Private Placement
Chile’s Transelec has raised UF1.9m though a private bond placement, it says. The power transmission company’s 2032 bonds priced at 97.55 with a 4.05% coupon to yield 4.23%. Corpbanca managed the sale. The bonds represent the remainder of 2032 bonds authorized for a January sale, when Transelec raised UF1.5m of bonds priced to yield 4.24%. Transelec is rated A+ on a national scale.
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Brazil Opportunistic On Bond Plans
Brazil is open to the idea of issuing bonds in either USD or BRL, but is under no pressure to access the market, says Fernando Garrido, public debt coordinator at Brazil’s ministry of finance. According to a London-based EM fund manager, the country has sufficient reserves and other liquidity cushions to keep it away from the external market for the next 2-3 years. “Brazil has low to nonexistent external financing needs, so our transactions have the objective of establishing liquid benchmarks in the international markets,” says Garrido. “Our current 10-year and 30-year benchmarks in the USD market are our global bonds maturating in 2021 and 2041, so these possibilities [for a retap] are always available.” If the sovereign were to come to market, it would almost certainly tap those bonds for an additional $1bn, bringing them closer to a benchmark size of $3bn each, the investor says. Brazil’s treasury secretary Arno Augustin said earlier this month that Brazil could potentially issue in USD or BRL though this depended on market conditions. “There’s no market to issue as everyone is selling,” says one EM debt analyst. “The global BRL sold off 100 basis points so there is clearly no market for it. With current market conditions issuers will have to wait on Europe and see how the crisis evolves.” As of Friday Brazil’s 2021s and 2041s were trading at 3.9% and 5.05% respectively on a yield basis.
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EM Debt Loses Ground
For the week ended September 21, EM bond funds registered net outflows of $690m, according to EPFR Global. Meanwhile, Lipper data show that in the week ended September 22 EM debt funds lost 4.22%, and are in negative year-to-date territory, at a 0.51% loss. By comparison, global income funds lost 0.74% in the week, and have earned 3.42% ytd. International income funds lost 1.75% in the week, and have earned 3.81% ytd.
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Ford Mexico To Price This Week
Ford Credit de Mexico anticipates pricing as soon as Tuesday on an 18-month floating-rate domestic bond. The auto finance services company plans to issue up to MXP1bn ($76m). Price talk is in the TIIE + 100bp range. This will be Ford Credit’s first bond transaction in the local markets since 2007. Actinver, HSBC, IXE, Scotia Capital are managing the transaction, rated A2 on a national scale.
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Paraguay Eyes Market, But Will Wait
Paraguay still has a long-term goal of tapping the international capital markets, but must first resolve a court case involving a defaulted loan and will also likely wait until the country achieves an investment-grade rating, government officials told LatinFinance at the sidelines of the IMF meetings. A Swiss court has ruled that the nation must pay debt holders interest and principal on an $80m loan extended to a Paraguayan diplomat in the 1980s during the dictatorship of Alfredo Stroessner. The government cannot tap the bond markets “until we resolve that,” the official said. Besides, he added, the country is in good fiscal shape and does not require the funds. Citigroup had been working with the government, but does not necessarily have the mandate for any upcoming issue, he said. The sovereign is still several notches below investment-grade, but was recently upgraded to BB- from B by S&P. This came on the back of increased fiscal flexibility thanks to the Brazilian government’s agreement to raise the country’s share of revenues generated from the Itaipu Dam. As a result, Paraguay’s revenues are expected to increase by 1.5% of GDP, allowing it to fund much needed-infrastructure. Earlier this year, BBVA Paraguay priced its $100m 3-year bond to yield 9.75% via Citi and BBVA, issuing what was thought to be one of the first cross-border dollar deals to emerge from the country. The Reg-S only transaction was rated Ba3.
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Region Braces for More Volatility
LatAm countries and corporates are comfortably positioned to weather the volatility sweeping across the globe, but capital market activity will be slow to return given the overarching uncertainty, said bankers and government officials on the sidelines of the IMF meetings in Washington this weekend. Indeed the region has already started to feel the effects of such nervousness, with the Brazilian real and Mexican peso for the first time taking a considerable hit in recent days, and bonds spreads widening in response to higher risk aversion. “It is another indicator, another milestone in this process,” said a senior banker. “I do think we are going to have to look anew at LatAm issuance, which has been relatively resilient. It proves yet again that decoupling is just not a word worth thinking about.” All eyes are currently on Europe and whether governments there can follow through on promises and plans to contain the debt crisis in the Greece. “Hopefully the different measures that the Europeans are putting in place start filling some of the gaps,” said Alejandro Diaz de Leon, Mexico’s head of public credit. “The huge question is whether the measures …are enough that we don’t go into the abyss.” Still confidence in LatAm is largely high given how it has already been stress tested several times over the last decade or so. It is also a region that withstood the global turmoil in the wake of the Lehman collapse and saw economies rebound rapidly. “The one region that has experienced the most crises and is the most battle tested market has always been Latin America,” says Robert Abad, a senior analyst at Western Asset Management Co. (Wamco) “For anyone who is positioned defensively or for normalization, LatAm is where you want to be.” Despite that, bankers say market volatility will clearly have a spillover effect on economies across the region and weigh on capital markets and lending activity in the short-term. Bankers may have large pipelines but for now they are largely
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AMX Sounding Out Japanese Accounts
America Movil (AMX) is heard sounding out Japanese accounts for a potential Samurai transaction with Mitsubishi UFJ-Morgan Stanley and Mizuho. Additional details were not available. A Samurai would follow AMX’s $2bn 5-year bond and $750m retap of its 2040s done earlier this month in which it locked in the second lowest coupon ever achieved by a telecommunications company. AMX issued a CHF270m 2016 bond in August that came with a reoffer price of 99.775 to yield 2.039%, or mid swaps plus 86bp. AMX and the banks said to be involved were unavailable to comment. AMX is rated A2/A/A.
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Brazilian Distributor Readies Local Debt
Brazilian electric distributor Companhia Energetica do Ceara (Coelce) is preparing to sell BRL400m in domestic bonds. A 2016 tranche would pay the DI plus up to 1.15%, and amortize in years 4 and 5. An inflation-linked 2018 tranche would pay a fixed rate equivalent to the NTN-B bond on the date of pricing plus up to 123bp, and amortize equally in years 5, 6 and 7. The exact amount of each portion is to be determined during the bookbuilding process. Coelce, a unit of Spain’s Endesa, plans to use proceeds for working capital and for repaying debt. Itau and Santander are managing the sale, done under the rule 476 restricted format. Coelce is rated AA on a national scale.
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Compartamos Upsizes MXP Floater
Mexico’s Banco Compartamos has sold MXP2bn ($144m) in domestic bonds, up from the MXP1.5bn originally planned. The 2016 floating rate bond priced at TIIE + 85bp, in line with 80bp-90bp guidance. Demand reached 1.8x. About two-thirds of the proceeds are destined for the repayment of debt, while the rest will be used for lending. Banamex, Bancomer and HSBC are leads on the transaction, rated AA on a national scale. Compartamos last visited the local bond market in October 2010 when it sold MXP1bn in 2015 bond, paying TIIE + 130bp.