Some bankers have been predicting anywhere between $5bn-$7bn in new bond supply for September and perhaps some more this month as companies look to tap before the post-summer rush, but this week’s rout and the gloomy mood hanging over the market raises doubts about just how many deals will see the light of day, at least in the short-term. This comes after US equity markets fell a good 4% Thursday, while the Bovespa plummeted 5.7% as risk aversion spiked over fears of an economic slowdown. “If risks escalate and there is a massive selloff in the markets, the September pipeline could move to December,” says one investor. Names like development bank BNDES, Colombian utility Empresa de Energia de Bogota (EEB), Brazilian electricity company Eletrobras, Brazilian toll-road company CCR, steelmaker Usiminas as well as banks like Banco do Brasil and Bradesco have all been heard eyeing either the dollar or global BRL market. To be sure, in theory pricing has become even more attractive after the yield on the 10-year UST hit 2.46% Thursday, breaching the 2.49% low reached in November 2010, but volatility is likely to make execution difficult. “If USTs continue at low levels and market conditions permit, there is potential for very high volumes in the $5bn-$7bn range or more,” notes a DCM banker. “Activity in the secondary over the last few sessions has seen demand for the belly of the curve but there has been more interest for 30-year bonds.” However, Wednesday saw secondaries slump alongside the rest of the broader market. “This is probably the worse day in EM debt this year, though we have yet to get to levels seen during the May sell-off last year,” said one EM corporate investor Thursday. “People are waiting for the payroll number (Friday) to see if we get some relief from that.” Still investors have money to put to work and bankers have been expecting companies to start announcing deals in late August. Meanwhile, the buyside is putting greater emphasis on liquidity. “In t
Category: Bonds
Paraguay Gets $75m from CAF
Regional development bank CAF has provided Paraguay with a $75m loan to support a government program to develop a more efficient and reliable national electricity system. The loan will also comprise an additional $20m in co-financing from the OPEC Fund for International Development (OFID). The estimated cost of the development program is $111m, of which 68% will be financed by CAF, 18% by the OFID and the remaining 14% financed by resources from the National Electricity Administration.
Safra Whispers Low Double Digits
Banco Safra is heard whispering 10.5% area on its 5-year senior unsecured Global BRL bond, with pricing expected as soon as today. Investors are comping against Banque Safra Luxembourg’s BRL400m Reg S only 10% 2015 (BBB minus), which was priced at 99.627% to yield 10.125% in June and was trading Tuesday afternoon at around 9.9%. “A 10.25% handle would be fine [to participate],” notes one senior portfolio manager following the name. Another, albeit less than perfect, comp is Banco Votorantim’s inflation-linked BRL1bn 6.25% 2016s (Baa2/BBB minus), which have been trading around 10% including IPCA. Investors are comfortable taking exposure to Banco Safra risk in light of the Baa2 and BBB minus ratings from Moody’s and Fitch, but increasing concerns over rapid credit growth in Brazil may mean that accounts will demand higher yields. Investors say Safra is looking at a BRL 300-BRL400m size for the 144A/Reg S deal. JPMorgan and UBS are the leads.
Allocations Limit Supply of Venezuela’s New 2031
Venezuela’s new $4.2bn 11.95% 2031 may be large, but the immediate impact of so much supply may be limited thanks to how the bonds were allocated. The sovereign followed its standard formula of pricing beforehand and sold he paper among a captive group of local buyers, but according to Barclays, about $2bn-$2.5bn of the offering may have been placed in the public banking sector, which is likely sell the bonds through the government’s FX platform Sitme. The private sector, which typically sells such issues immediately into the secondary, saw smaller tickets and allocations. This may be negative news for the Venezuelan private sector, but should be supportive for Venezuelan assets overall, the shop notes. “[The fact that] the new 31s will not be sold aggressively by local holders leaves the market vulnerable to further upside price action,” said an investor. The deal was lead by Deutsche Bank and the Russian entity Evrofinance Mosnarbank, which is partly owned by Venezuelan development fund Fonden. “The idea is to try to bring Russian investors to buy in the secondary,” says a banker. The bond was priced at par and essentially amortizes equally in August 2029, 2030 and 2031. The RegS bond matures on August 5 2031.
CAF Preps Local MXN Bonds
Regional development bank Corporacion Andina de Fomento (CAF) plans to issue up to MXP 1.5bn ($128m) in 3-year and 10-year bonds through lead BBVA Bancomer. The 3-year floater is expected to price at a spread over TIIE with the 10-year at a fixed rate. CAF has a global A1/A +/ A+ rating from Moody’s, S&P and Fitch respectively. The MXP bonds have yet to receive a local rating. CAF last came to market in June when it retapped its 3.75% 2016s for another $500m. The MXP bonds have an August 19 issue date.
CCR Heard Sounding Investors
Brazilian toll-road operator road operator Companhia de Concessoes Rodoviarias (CCR) has been sounding out the US buyside through Bank of America Merrill Lynch (BAML), say investors. For now, the Brazilian toll-road operator is simply heard to be engaging accounts but with no solid deal talk. However, if it were to issue USD bonds, such a deal would mark the borrower’s debut in the international bonds markets, though it is no stranger to local debenture transactions. In May, its subsidiary Concessionaria do Rodoanel Oeste sold BRL500m in 2014 bonds paying 109.2% of the DI, and BRL550m in 2015 bonds paying 111.0% of the DI. Bradesco and HSBC managed the sale, rated Aa2 on a national scale. In 2009, CCR also priced a follow-on equity offering through Itau BBA, with BTG Pactual and BAML coming in as joint leads.
Cosipa Receives Consents to Amend 2016
Brazilian steel company Cosipa has received consents from holders of $140.747m of existing 8.25% 2016s, allowing it to amend the indenture governing the notes. The idea is to establish the same covenant package contained in the 7.25% 2018s issued by Usiminas, which merged with Cosipa in April 2009. The 2018s have less restrictive covenants thanks to Usiminas’ investment grade rating. Holders who validly delivered consents before the expiration date of July 27 will receive $2.50 for each $1,000 in principal. Itau BBA is acting as dealer manager.
Brazilian Lender Readies FIDC
Banco Intermedium is preparing a BRL150m ($94m) FIDC transaction backed by credit receivables from government agencies for sale in the domestic market. The 4-year fund pays a spread to the DI that is to be defined during the bookbuilding process. The transaction has not yet been rated, and is expected to close in October. The FIDC will purchase receivables for credits originated by the social security institute INSS and other public entities. Itau is managing the sale.
Helm Sets Local Bond Issue
Colombia’s Helm Bank has set an August 8 date for the sale of a COP200bn-COP300bn ($113m-$170m) domestic bond, according to local DCM bankers. The bank will choose from 6 available tranches based on the demand it sees. A 3-year note paying a spread to the interbank rate IBR, 5 and 7-year pieces paying a spread to the IPC, as well as fixed-rate tranches of 3, 5 and 7 years are all available. Generally, 2-3 tranches are the norm in Colombian local deals of this size. Helm is managing the sale itself, and is rated AA+ on a national scale. Issuance has been picking up recently in Colombia, if only for financial issuers. “A lot of liquidity has entered the market in the last 2-3 months,” says an analyst at a local shop, coming mostly from large coupon payments that the government has made on its local debt. Other financial issuers are looking to follow this month, including Banco Falabella (COP150bn) and Banco Finandina (COP60bn), Banco de Bogota and Banco Davivienda. Bancolombia sold COP800bn ($450m) in 5 series of new domestic bonds last week.
La Polar Seeks Agreement to Avoid Bankruptcy
Chile’s La Polar plans to seek creditor approval of a judicial agreement to rework its debt and avoid bankruptcy, it says. The Chilean retailer needs the agreement to proceed with a planned CLP100bn capital increase after it set aside loan-loss provisions topping CLP500bn ($1.01bn) last month for consumer-lending losses and fired senior managers when irregularities were found at its consumer lending unit. La Polar’s board has agreed to file a preventative judicial agreement that requires support from creditors representing more than half the outstanding debt to be processed. Bondholders agreed June 20 on a waiver of covenants that allows the company to suspend pre-payments while stockholders approved on June 22 the sale of $200m in new shares.